Siddhartha Ahluwalia 1:09
Hi, this is Siddhartha Ahluwalia, welcome to The NEON Show. I’m your host and managing partner at NEON Fund, a fund that invests in the best of enterprise AI companies between US and India corridor, like Atomic Work, SpotDraft, CloudSEK. Today, I have a very, very dear friend with me, you know, he and I go long back and so special that, you know, through this podcast, you know, we’ll be the first one to share his journey.

Ashish Toshniwal, founder of YML and 10kR, Ashish, so glad to have you on The NEON Show today.

Ashish Toshniwal 1:42
Very thrilled to be here, man.

Siddhartha Ahluwalia 1:44
Your journey is very inspiring, right? You started from Kolkata, lived in a 15 member home with one washroom. And now you build a company and sold it for 350 million dollars.

It had like 25 million EBITDA at its peak. What a journey.

Ashish Toshniwal 2:02
Yeah, I think, you know, it worked out. It took us 14 years and, you know, as the saying goes, it took us 14 years to become an overnight success.

Siddhartha Ahluwalia 2:12
And what I’m excited about is you are just 43 right now, you look like 33.

Ashish Toshniwal 2:18
Thanks. Thanks for saying that. I don’t think my kids agree, but sure.

Siddhartha Ahluwalia 2:23
But it’s amazing what you have accomplished, you know, at such a young age. And the commendable thing is your company was completely bootstrapped.

Ashish Toshniwal 2:31
Yeah. Yeah. And, you know, in the Bay Area, if you’re bootstrapping your business, people look at you as if like something is wrong with you because it is unheard of.

I think like raising money is such a badge of honor instead of like, you know, how you’re servicing your clients, your growth rates, all those things. And honestly, like for six, seven years, I also was very sceptical of like, look, we have never raised money. And where are we going?

I used to question myself, I used to read TechCrunch and, you know, you would always see all these like startups raising so much money. And then by the time we actually VC started approaching us and, you know, a few people wanted to put money in, we did not need to raise money. So we were like self-sufficient and then, you know, never thought of raising ever.

Siddhartha Ahluwalia 3:27
The most interesting other part is, you did another thing contradictory, YML was a product design and engineering services company. People think of services like a lifestyle business. Yeah.

You’re sitting in the epicenter of products.

Ashish Toshniwal 3:42
Yeah. See, Sid, what I’ve realized is, I don’t want to build like idealistic, you know, businesses which are not grounded in realities. Okay.

What that means is, I want to build something which people love and people want. And in fact, if I walk you through the pivots we have had, the first idea we had was a idea of launching a classified site in India. And we were in Austin, me and my co-founder.

And this was 2006, by the way.

Siddhartha Ahluwalia 4:18
You were what, 22?

Ashish Toshniwal 4:19
24 in 2006.

Siddhartha Ahluwalia 4:21
Just out of Purdue.

Ashish Toshniwal 4:22
Just out of Purdue. And I got a job at Dell Computers. In fact, you know, my co-founder, we both went to college together.

We both did our engineering at Purdue. And then he was the smart one. He graduated six months early.

You know, he moved to Austin, Texas, then I followed him after six months. And I call him up, Sumit, you know, I’m here, got a full-time job here, where are you? So, he’s like, Warner Ranch Drive.

I’m like, me too. And then he’s asking me, okay, which apartment? I’m like, this apartment.

And he’s like, me too. He’s asked me, what’s your apartment number? I’m like, 933.

He asked me just to walk out. And he walks out of the apartment, I walk out, and we share the common wall. And there are probably more than 600 apartments in this complex.

Siddhartha Ahluwalia 5:19
Okay.

Ashish Toshniwal 5:20
And I would say that is serendipity. And I think that is the fact that we lived right next to each other. We cooked up a lot of ideas before even YML became successful, right?

The first idea was classified site, we launched it. It didn’t really do…

Siddhartha Ahluwalia 5:38
Full time while doing that?

Ashish Toshniwal 5:40
No, I was doing it on the side, experimenting it. And plus, if you’re on visa in the US, you really need to find traction before you actually do that full time. So that was my first idea.

Me and my co-founder, we worked on it together on this. And then second idea was like Groupon. And that didn’t do very well, we launched it.

Third idea was around Facebook apps.

Siddhartha Ahluwalia 6:10
Okay.

Ashish Toshniwal 6:10
And my co-founder, he did a course in Facebook apps, and he did his master’s in Stanford. So you know, he became an expert in Facebook apps. And that actually did well for some time until Facebook changed its policy, and you couldn’t like launch any more apps, and the traffic dropped overnight.

So that business was done. Then something happened, which changed my life, which was, you know, we worked on this app called Intro to Letters, ABCD1234, simple app, app number 55. And we launch it and, you know, get this email, I love what you’re doing, let me know how I can help best Steve Jobs at apple.com.

Wow. And we are like, there’s no way this is true, because this definitely looks fake. And we went back and forth, you know, with Steve Jobs, and we were like, look, we are getting a lot of backlash from Montessori school, because we’re bringing technology to Montessori school of thinking.

And his response was, you keep doing what you’re doing, you’ll prove the critics wrong.

Siddhartha Ahluwalia 7:28
How many emails exchange was this?

Ashish Toshniwal 7:30
This was like two, three emails exchange, unfortunately, Steve Jobs was not also keeping well.

Siddhartha Ahluwalia 7:35
So, you could not meet in person?

Ashish Toshniwal 7:37
So unfortunately, he could not meet us during that time. This was 2009, 10.

And I think he passed away one or two years after that. And it was, it was inspiring for us, because until this point, we were doing things, which only we cared about nobody else.

Siddhartha Ahluwalia 7:55
And you were full time in this or not yet?

Ashish Toshniwal 7:57
So this, we were still experimenting, right? And so what happened was, once we start getting obviously validation from Steve Jobs, you know, I jumped on it full time, right around that time. And this was literally, again, six months after App Store was launched.

And we go full time. And we are building great apps, by the way.

Siddhartha Ahluwalia 8:19
This was 2009?

Ashish Toshniwal 8:20
2009, March is when I jump on it full time. Right.

And we are building great apps. And what we see is, it does really well for three months, six months, and the traffic drops after that. So it became a great craze.

And it was a such a different form factor before like, iPhone, there was no such thing as mobile engineering, mobile design, right, like there was no such thing. And we brought a lot of, you know, industry standards on design, you know, engineering, and actually, Apple became a client too, you know, after a few years.

Siddhartha Ahluwalia 9:02
You were designing apps for Apple?

Ashish Toshniwal 9:04
So we were working with Apple on some, you know, healthcare initiatives. And this was like working with their team, healthcare institutes, and we were the iOS expert. So bringing all three together to do, you know, healthcare initiatives and stuff.

And the big thing here was, once we launched all these apps, it never did well. In the long run, it became, it made us famous. So you know, we were on Wall Street Journal, CNN, CNBC, we got a lot of fame, but I knew the reality, the business was very poor.

That’s when we were like feeling the need, we need to do something, otherwise, we can’t survive.

Siddhartha Ahluwalia 9:48
So these apps, what I understand is really became popular, like they were obviously like top 10 charts or top 20 charts, but you never made money.

Ashish Toshniwal 9:57
We never made money in a sustainable way, right? It will show a lot of false positives, like, you feel like, man, look, like everyone is appreciating this, but we know we are not making money. And at that point, what happened, a lot of these big companies, you know, whether it’s Safeway or Salesforce or like SAP, they were like, look, this mobile thing is very unique.

It requires iOS engineering, all our people are on the web. We don’t have the skill set, we want to work with you.

Siddhartha Ahluwalia 10:32
And they reached inbound to you?

Ashish Toshniwal 10:33
All inbound.

Siddhartha Ahluwalia 10:34
How is that possible?

Ashish Toshniwal 10:35
So what happened was, we got really famous on few Facebook groups. And we were called the app guys in the valley.

Siddhartha Ahluwalia 10:44
It was just you and Sumit, nobody else?

Ashish Toshniwal 10:46
It was just me, Sumit, and actually my wife was also working with us back then.

Siddhartha Ahluwalia 10:50
By then you were married?

Ashish Toshniwal 10:51
Yeah, I was married.

Siddhartha Ahluwalia 10:53
With no money?

Ashish Toshniwal 10:53
With no money.

And, you know, it’s not a good position to be in. And you know, we were like onboarding contractors just to keep the cash flow low. I mean, cash burned low.

Siddhartha Ahluwalia 11:05
What do you mean by onboarding contractors?

Ashish Toshniwal 11:07
Like whenever we had a need, we would onboard a contractor. Once the need is gone, you know, we would let them go.

Siddhartha Ahluwalia 11:14
Okay, for your own app development?

Ashish Toshniwal 11:16
For our own app development. And then sometimes when we got this contract, you know, from these big companies, we were like, these are all one-off things. It may not be sustainable, so I don’t want to hire.

But what started happening was we became very famous as the app guys in the valley.

Siddhartha Ahluwalia 11:36
But when did you shift to the valley?

Ashish Toshniwal 11:40
We were always in the valley.

Siddhartha Ahluwalia 11:41
You said you initially started.

Ashish Toshniwal 11:43
Right. So, I moved from Austin to valley in 2008. Sumit moved probably 2006-2007 for his Stanford degree.

And then we have been always in the valley after that. So, you know, when these things were happening, all these inbound requests, we thought it would be temporary.

Siddhartha Ahluwalia 12:09
Yeah, because companies need app only one time and…

Ashish Toshniwal 12:12
Exactly. Right. That’s exactly what we thought.

But the phone kept on ringing and we had to make a very big call. Do we stick with our product ideas or should we move to services? And right around that time, Zuckerberg, Larry Page came out saying, Facebook, Google are mobile-first company, which is happening now with AI-first, right?

And Sumit and I discussed like, how about we actually pivot to make other companies mobile-first? And that pivot, you know, made YML what YML became. That was the most successful pivot.

Siddhartha Ahluwalia 12:55
And which year was this?

Ashish Toshniwal 12:56
This was, I think, 2012-ish.

Siddhartha Ahluwalia 13:00
For 3-4 years.

Ashish Toshniwal 13:01
So, 3-4 years, we were just, you know, doing things, experiments and surviving and like, and honestly, like, first few years were really hard, where Sumit and I, we both were on visa. We’d never had any kind of savings. All our friends are like, you know, in Google and Facebook and they’re buying houses and we are struggling to pay rent.

And you know, we had a lot of doubts during that time. But I think looking back, that pivot, again, back to this idea of like, we want to build something what customers want. And customers wanted our iOS engineering design skills.

And that’s what, you know, we built the company with.

Siddhartha Ahluwalia 13:47
And how far the company scaled before you received any acquisition offers?

Ashish Toshniwal 13:52
So, what happened was, 2015-ish, Sumit and I were like, look, we have never raised money. We don’t know where we stand. Because when you raise money, you know the valuation and you know your equity.

So, you can figure out where you stand. We never raised any money. So, we didn’t know where we stand.

So, we were like, you know, it would be good to see what’s the interest like. And I remember, you know, even our M&A broker or the company we used, he was so good. Like, I think he generated close to six offers in like two to three weeks.

Siddhartha Ahluwalia 14:35
And how did you find that broker?

Ashish Toshniwal 14:36
So, I knew the founder two, three years before. And I kept in touch. And I was like, look, I’m not sure whether to sell or not.

But we definitely want to run the process and see what happens. And fortunately, we landed with, you know, five to six offers. And in fact, you know, I went to New York, along with Sumit.

And we almost finished our first pitch meeting. And our second meeting was like, probably 15 minutes away walking in New York. And it was about to start.

And our first meeting got late. And my calendar invite popped up that meeting. And this was a competitor, you know, to the first acquirer we were pitching to.

And they like that meeting popped up. And there were like 15 people in the meeting along with me and Sumit. And we are all looking at each other and smiling.

That the next meeting is with their competitor, right? But you know, honestly, when I look back, this all happened for good, because I think it created like, you know, some level of FOMO or whatnot.

Siddhartha Ahluwalia 15:48
Wow. So, you were projecting on your computer screen?

Ashish Toshniwal 15:53
Yeah.

Siddhartha Ahluwalia 15:54
And then the calendar?

Ashish Toshniwal 15:54
The calendar invite popped up that the next meeting is with, you know, Omnicom.

Siddhartha Ahluwalia 16:00
And the first meeting was with?

Ashish Toshniwal 16:02
The first meeting was with MDC partners who actually bought, you know, equity.

Siddhartha Ahluwalia 16:07
And how soon did they close the transaction after seeing that pop up?

Ashish Toshniwal 16:10
I think, so we were also lucky there that when we ran the process, you know, for two, three months, not running the process. Once we got the LOI, we had unbelievable traction in the market. We onboarded close to three to four clients in three months, Fortune 500 clients.

Siddhartha Ahluwalia 16:33
So, when you started the acquisition of the process, what was your revenue back then? 2015-16?

Ashish Toshniwal 16:40
I think 2015-16, we were close to 10 million in revenue.

Siddhartha Ahluwalia 16:44
And some EBITDA.

Ashish Toshniwal 16:45
3 million in EBITDA.

So, that was the scale back then. And, you know, we, fortunately, our track record was very good. And, you know, the deal closed in like three months or something.

Siddhartha Ahluwalia 17:01
And the first deal size was 60 million, where they acquired 60% of the company.

Ashish Toshniwal 17:05
Yeah, yeah.

Siddhartha Ahluwalia 17:07
So, they gave a 6x revenue multiple.

Ashish Toshniwal 17:10
Yeah. And like, look, the big thing was iOS was hot, right? But we were a services company.

So, we knew that limitation. And there were some accelerators in place. Like, if we, you know, hit a certain milestone that year, then the valuation will increase.

And, you know, there will be a catch up.

Siddhartha Ahluwalia 17:31
Okay.

Ashish Toshniwal 17:31
Right? Like, so, we kind of like hit all, you know, milestone.

Siddhartha Ahluwalia 17:37
But that would have been big, right? So, it would have landed like both you and Sumit with more than 15-15 million each.

Ashish Toshniwal 17:44
Yeah, I mean, you know, that was a big outcome for us. And truth be told, my bank balance was sometimes four figures and five figures for the longest time. And that obviously creates a lot of deep insecurity.

Siddhartha Ahluwalia 18:02
Even after having 3 million in EBITDA?

Ashish Toshniwal 18:04
Yeah, because, you know, we were pouring a lot of that money back in the company. You know, I think like Sumit and I, we were probably one of the cheapest employees in the company, even after running it for like seven years.

Siddhartha Ahluwalia 18:18
How big was the company in 2016 before the acquisition?

Ashish Toshniwal 18:21
I think 2016 same, like, you know, close to 10 million or so.

Siddhartha Ahluwalia 18:25
No, team-wise.

Ashish Toshniwal 18:26
Team-wise was maybe like, I don’t know, 50-70 people, something like that, you know. And we had a team here in Redwood City. And we had a team in Bangalore.

Siddhartha Ahluwalia 18:42
So, I assume the first thing that you would have done is bought houses.

Ashish Toshniwal 18:46
That’s obvious. In fact, the first thing I did was go to the ATM machine and take the receipt of the bank balance.

Siddhartha Ahluwalia 18:53
So, it doesn’t disappear.

Ashish Toshniwal 18:54
That’s what I did.

Siddhartha Ahluwalia 18:57
That must have been a fantastic feeling.

Ashish Toshniwal 19:01
Yeah, you know, the feeling is like, I think like when this happened, we could not believe that this is happening, because we never saw that kind of money. And I would say that that also helped us become more of a risk taker and go aggressive and, you know, go all in or go home. And which, you know, obviously helped us in the next like seven, eight years.

Siddhartha Ahluwalia 19:30
And you ran the company for six more years before the final acquisition at 350 million happened. Tell us more about that part.

Ashish Toshniwal 19:37
Yeah. So, one of the biggest things I believe in is even when you are successful, you have to go through the pivots, okay. And even if you’re a scaled company, there’s competition, your services will get commoditized, clients will be confused.

Why do I use you, you know, versus like three other competitors. iOS engineering was one of the hottest skills, like AI engineering yesterday in 2009, 10, 11, 12, 13, right? Like hiring them were almost impossible, right?

What started happening around 2017, 18, you know, when you’re offering something, which used to be hot, a lot of people get into the market and clients are confused. Why would I hire you versus this company, which is offshoring everything and giving me such a great price. So, what we did was, our strategy was, there are two types of competitors, right?

One is only US. Their services are great, but they’re very expensive. And one is they’re offshore, you know, they’re very cheap, but their services are not good.

And our strategy was, how do we, you know, come up with a strategy, which is in sync with big clients, Fortune 500 clients. In fact, in one all hands, I was so frustrated that I told the entire company, look, if we don’t have repeat business, we don’t have a business.

Siddhartha Ahluwalia 21:11
This is after the acquisition.

Ashish Toshniwal 21:12
This is around the acquisition. Because we were getting a lot of inbound clients. But the strategy is, if let’s say your first SOW is at 100K, how do you grow to 1, 2, 3, 4 million?

And you know, if the client churns out at like less than a million, well, then there’s a heavy cost involved in like bringing on a new client, right? And that became a cornerstone of our business. In fact, some of the clients have stayed with us over 6, 7, 8 years.

And each account was worth maybe over 70 million dollars, you know, sometimes over a 7, 8, 9 year period.

Siddhartha Ahluwalia 21:55
You’re saying they paid 70 million dollars over 8, 9 years?

Ashish Toshniwal 21:58
8, 9 years.

Siddhartha Ahluwalia 21:59
And what was the absolute highest that one client paid during one year?

Ashish Toshniwal 22:04
Close to 18 million.

Siddhartha Ahluwalia 22:07
That was same iOS services?

Ashish Toshniwal 22:09
No, so that’s the thing, right? Like when it comes to pivot. So early on, we were iOS engineering, iOS design, you know, which heavily got commoditized.

So when we saw two competitors, one is very expensive, but good. One is very cheap, but not good. Our whole positioning was, and this was in sync with what big clients needed.

So all these Fortune 500 clients, they were feeling the pressure by one of the big tech or some startup in the valley who’s like heavily funded that they’re going after them. Whether you’re in healthcare, retail, doesn’t matter. It’s either Amazon, Apple, or some heavily funded startup.

So what was the common theme across Silicon Valley startups and some of these big companies, especially like Apple, was great experience. And, you know, some of these Fortune 500 clients, whether the bank, retail, healthcare companies, I think they had decent teams, but they were not able to crack great customer experience on mobile, web, the whole connected landscape. And our positioning was that you want to work with YML if you want to like build a startup within a Fortune 500 company.

And our mission became, we export Silicon Valley to the world, where Silicon Valley is not a zip code, but it’s a mindset. And it’s a combination of innovation, design, engineering, and how do you deliver things fast rather than, you know, taking years. So that was the positioning.

And that actually helped us gain clients and stave off competition. And, you know, that pivot.

Siddhartha Ahluwalia 23:58
But still, it was a services company building web and mobile apps. So how did you differentiate?

Ashish Toshniwal 24:04
From mobile, how we differentiated was that we have a design team here in Silicon Valley. And design is such a thing. It’s very hard to offshore because it’s so cultural.

Just imagine if, you know, someone has not experienced Disney and they have not experienced how healthcare system works or they have never bought an automobile insurance in their life. They can never connect with these companies. And these were our clients, some of the biggest ones.

So what we realized, this is so cultural that we can offshore. And we built 150 people design team here in Redwood City. And customers loved it.

And where customers wanted to work with us for our design team, and they stuck around, you know, because our engineering team was good and they were delivering at a cost-effective price and it was sustainable. And we became almost like a startup within, you know, a Fortune 500 company.

Siddhartha Ahluwalia 25:12
And the value was great design.

Ashish Toshniwal 25:14
And the value was that we will work on every connected experience, which is digital for a Fortune 500 company. Let’s say if it’s a bank, right? The bank has multiple segments, corporate, wealth management, consumer.

And there is a mobile app for each one of them. Then there is a web app. Then there is, you know, ATM machine.

And then there is an experience what happens when you show up in the bank, you know, from a digital standpoint. If there’s a, you know, a banker who’s attending to the customer, they also have to look at some digital interface. We were working on all of them, not just one thing.

And how do you connect all of these things together became, you know, our speciality. And that pivot is what took us like 7x from, you know, growth standpoint from 2016.

Siddhartha Ahluwalia 26:15
So, if this acquisition hadn’t happened and you hadn’t become like financially independent in 2016, what would have changed for you? Or what would have not changed?

Ashish Toshniwal 26:26
See, we ran the company, you know, cash flow positive even after the acquisition happened. So, it’s not like there was a need for cash infusion.

Siddhartha Ahluwalia 26:37
Or they gave you more money to hire people? No.

Ashish Toshniwal 26:40
We never had any need of cash infusion. But I think the biggest unlock was being fearless and go all out and capture the market.

Siddhartha Ahluwalia 26:53
What was the motivation? Because now you had made money, right? And you had only like 20% equity each in the company.

Ashish Toshniwal 27:01
See, the motivation is how do you, you know, build something which can impact a lot of lives, you know, whether it’s customer, whether it’s employees, and how can you like grow the company. And the cool thing for us was we are bringing such kind of design and engineering to fruition, which was never done before, because it was iOS. And that was satisfying for us.

You know, and we both were engineers and building stuff is what we did. And the motivation was to build a company, you know, which is not just a lifestyle business, but over like 500-600 people. And, you know, you’re catering to big clients.

Siddhartha Ahluwalia 27:44
Yeah. So, I believe there could have been another motivation which was personally challenging yourself that, hey, you took a company to 10 million. ARR How soon can you take it to, let’s say, 50 million ARR?

Ashish Toshniwal 27:58
Yeah. So, I think one of the biggest thing was when founders are not financially secure, and let’s say they put in 5-6 years in the company, they become so fearful as…

Siddhartha Ahluwalia 28:14
This is 100% of what they own.

Ashish Toshniwal 28:15
Yeah. This is 100% of what they own. They cannot let it go because they’ve put in so much time.

They cannot let it go to zero. They become very fearful. And they try to optimize for the downside rather than the upside.

And when you are financially secure a little bit, then what happens is you go all out. And that is where, you know, you grow the company.

Siddhartha Ahluwalia 28:41
Some other VCs believe that it makes you super comfortable.

Ashish Toshniwal 28:44
And that’s why you don’t want to, like, take massive amount of money off the table because then, you know, you don’t have skin in the game. But at least you want to be financially secure where, you know, you can go all out.

Siddhartha Ahluwalia 28:58
There’s a very fine balance that you are saying.

Ashish Toshniwal 29:00
That is right.

Siddhartha Ahluwalia 29:02
And did you guys then went all out?

Ashish Toshniwal 29:04
So our growth from 2016 to 2023 was, I think, 7 times. 7 to 8 times. I think if I look at the growth over the last 10 years before I sold, we grew at like 59% as an average annual rate of growth.

And there were years when we tripled the company. And then there were years, you know, when we did not do very well. And those were the years when you have to bring in the pivot.

And I would say one of the biggest pivots which a lot of people don’t talk about is as the founder CEO, you know, have you been able to fire yourself and rehire yourself in another role?

Siddhartha Ahluwalia 29:54
Did you do it?

Ashish Toshniwal 29:55
That, I think, was very difficult, unnatural. And I don’t think any founder CEO can scale a company until they do this. And this was actually a big learning.

In fact, what happens is when you hire great people and you’re the founder CEO, there will be a window of time when you are like, man, you know, all these people are so much better than I am. What am I supposed to do? And like the job I was doing, now they are doing it.

What is my role now? And that is actually a great tipping point for you to work on the biggest company challenges rather than, you know, work on the same role over and over again.

Siddhartha Ahluwalia 30:42
But you were still the CEO of the company after the acquisition?

Ashish Toshniwal 30:45
Yes. So I was the CEO until I sold the company completely for like 13-14 years. You know, throughout the journey.

Siddhartha Ahluwalia 30:54
What made you the final decision to sell it completely for $350 million? Did they offer it themselves or was it?

Ashish Toshniwal 31:01
So, you know, one of the things was there were certain agreements that they are going to buy the remainder equity. And fortunately, what happened in 2020, February, this was the month of COVID. And technically, you know, we were supposed to sell the equity around that time. And COVID happened.

And we were given the opportunity, hey, if you want to run the company more, you can, because there was so much uncertainty, right? And we are like, as founders, and I, you know, obviously, as founders, you love your company, you want to like grow it more, given the opportunity, and that’s what we did. So we ran the company and the company grew so much over the COVID years.

Siddhartha Ahluwalia 31:52
It was what, 30 million during COVID when COVID started?

Ashish Toshniwal 31:55
Um, I think our peak EBITDA was $25 million.

Siddhartha Ahluwalia 32:00
No, but the revenue?

Ashish Toshniwal 32:02
The revenue was close to 80 million.

Siddhartha Ahluwalia 2:04
But that’s 2022, right?

Ashish Toshniwal 32:06
22. When COVID started, we were at 24.

Siddhartha Ahluwalia 32:12
So what difference would an outcome did it make? Like if you had sold at 24 million, what cost you would have sold it at? Was there an agreement to a revenue multiple?

Ashish Toshniwal 32:22
It was an agreement on EBITDA multiple and rate of growth multiple. So I mean, it’s kind of hard to tell, but it would be maybe less than 60-70% of like the final enterprise value.

Siddhartha Ahluwalia 32:41
That’s quite a significant number.

Ashish Toshniwal 32:42
That is significant, because if you look at those six, seven years, you know, if I accumulate the whole six, seven years, I think our cash flow was close to $80 million. And that in itself is a big part of the valuation.

Siddhartha Ahluwalia 32:59
And if you have to do it again, what difference would you have done during the entire journey?

Ashish Toshniwal 33:05
I think one of the big things I wish I had done was, I had experimented a lot more, you know, early on.

Siddhartha Ahluwalia 33:17
If you never had cash flow, how would you have experimented?

Ashish Toshniwal 33:21
And that is hard. And, you know, and one of the thing is like, how do you push the boundaries a little more than play a more safer game? I wish I could have done, you know, I think we could have built a company which was probably five times bigger than what we were, because the opportunity was unbelievable, you know, during the best days of mobile.

Siddhartha Ahluwalia 33:51
So, you’re saying that you were not able to hire at the speed at which the clients were coming?

Ashish Toshniwal 33:56
There were times when we had so many clients or the same client was giving us so much business that we had to decline it. Because our team, even though I think 300, 400, 500, ultimately, we were 600, there were times like we were hiring as much as we could, but still we could not hire fast enough. And that, you know, those windows are there and entrepreneurs who, you know, make use of those windows, they actually scale the company.

Siddhartha Ahluwalia 34:32
So, you were saying it could have been a billion dollar outcome?

Ashish Toshniwal 34:35
It could have been, yeah, absolutely, you know. But, you know, it’s like, look, we just launched 10KR. And so, I’ve done that with some of the best people I’ve worked with in my life ever.

So, Stephen Flemons, Stephanie, Neil, Craig, they were all like heading, you know, design, product, product design, content, sales. And, you know, some of them left after the acquisition. And we were just discussing what’s next.

And we launched this. And the whole idea here is that we are building great… So, it’s at the intersection of product design and engineering.

It’s all merging. You know, in the pre-ChatGPT era, to build a product, you have to hire designers. And you have to hire like UX researchers and, you know, engineers, iOS, Android, front-end, React.

And you have to have product managers, becomes like a pretty big team. And our bet is that with AI, you don’t need so many people. You can build the same product in a more cost-effective way with amazing people who are specialists in their craft.

And you can build faster. And that’s exactly what we are doing in 10KR, where we are building, you know, great product with our own, you know, IP GPTs. And we are using off-the-shelf, like AI products, which are best in class for design, for engineering, and so on, so forth.

Siddhartha Ahluwalia 36:26
One of the things that I often wonder is, if you had taken like money from VCs during the first journey, what would have been different?

Ashish Toshniwal 36:39
I think the outcome would have been, probably the personal outcome would have been worse. For not just me, but also the people at YML.

Siddhartha Ahluwalia 36:50
And you had done another, you say, a mistake, right, during the journey. You were offered equity by companies like Credit Karma.

Ashish Toshniwal 36:58
Oh, man. Oh, man. Like, I would say some of the biggest mistakes were the chances I did not take, which was…

So, we built like the first mobile product for a lot of startups. And one of the startups was Credit Karma. And Credit Karma, I think like, you know, we built their first product mobile app.

And we were offered, and they were also very small. Those were like pre-series A company. And they were like, look, Ashish, why don’t you take some equity instead of…

Siddhartha Ahluwalia 37:32
How much equity were they offering?

Ashish Toshniwal 37:34
You know, I don’t remember, but I can tell you, it would have been worth a few tens of million if I had taken that.

Siddhartha Ahluwalia 37:41
Like a couple of percentages in that company?

Ashish Toshniwal 37:43
I don’t know, man. Like, but instead of taking cash, and my response to Ken was like, look, I can’t pay rent in equity.

Siddhartha Ahluwalia 37:54
So, this is pre-2016?

Ashish Toshniwal 37:56
Oh, yeah, yeah, yeah. This is 2010, 11.

Siddhartha Ahluwalia 37:59
Okay.

Ashish Toshniwal 38:00
You know, that time frame.

Siddhartha Ahluwalia 38:02
I think that you might have earned like 50 to 100k.

Ashish Toshniwal 38:07
By, yeah, in the services.

Siddhartha Ahluwalia 38:09
In the services from Credit Karma.

Ashish Toshniwal 38:11
And I don’t know if you know, like, Credit Karma was sold to Intuit for $7 billion in 2020 or 2021.

Siddhartha Ahluwalia 38:18
Even 1% page at 7 billion is 70 million.

Ashish Toshniwal 38:22
So, yeah. So, it would have been a big outcome for sure.

Siddhartha Ahluwalia 38:26
And it would have maybe impacted your final valuation.

Ashish Toshniwal 38:28
Absolutely. Absolutely. But you know, when you are so early in your career, and you’re trying to build a company, bootstrapping it, you don’t take such chances because you never know what’s going to happen.

Siddhartha Ahluwalia 38:44
What are the other things, you know, besides this, that you could have changed or done more during the journey?

Ashish Toshniwal 38:52
So, one of the things I’ve realized is, it’s like, when you look at leadership, right? When founders are building companies, they don’t think about leadership, culture. They’re just focused on building, you know, the business, which obviously is the right thing to do.

And I was very heavy into design and, you know, sales and a little bit of engineering. Like my co-founder was probably running, you know, most of engineering and he actually moved to India too.

Siddhartha Ahluwalia 39:25
Where is Sumit right now?

Ashish Toshniwal 39:27
Sumit is here in the Bay Area. Yeah. And one of the things I would say is, I never thought about leaderships that much.

And when I look at leadership, I think it’s like travel agents, you know, they have to send people to areas which they have never gone to, right? And I feel like I operated as an individual contributor, even though I was a CEO for like the longest time. And I feel like I could have done that differently, you know, where like I’m focusing or investing more in building or coaching the team, rather than working and grinding myself.

Siddhartha Ahluwalia 40:15
Well, I have a different school of thought there, right? Vinayak was leading a production for a shoot here, right? And when I have been working for 10 years, he joined my first company as an intern.

Very grateful to him for this 10-year partnership. My co-founder from a previous company, he became head of engineering for one of our portfolio companies, like co-founder for 13 years. So, I didn’t do anything special or did anything coach, but what I think I might have done is right by actions.

Ashish Toshniwal 40:50
See, no doubt about that. And, you know, with the ChatGPT era, you have to go up and down very fast. But I think the people or founders who do it for the first time, their ability to go up, you know, it takes a while, right?

They are at the ground level for a long period of time before. And, you know, if you’re scaling fast, you have to go up and down. And what I’m saying is, I remained at the ground floor for a long period of time.

Siddhartha Ahluwalia 41:22
My only regret is my first acquisition was not really a great outcome. So, I couldn’t create wealth for me as a separate thing, you know. But for my team.

Ashish Toshniwal 41:33
Well, man, like, you know, it’s luck is also a very big part of it, right? Like, how do you, that is, you know, the timing and all those things.

Siddhartha Ahluwalia 41:45
So, that’s one of my big focus area for Neon, like how do I create wealth for the entire team that is working for it.

Ashish Toshniwal 41:53
It’s gonna happen, man. Like, there’s a reason I have 7x my investment into Neon. So, I think you guys are doing a lot of things right.

Siddhartha Ahluwalia 42:01
Maybe you can tell like, what made you invest in Neon? And what made you do it?

Ashish Toshniwal 42:06
So, I remember I moved to Bangalore, right? I met with you. And when I met you, I kind of felt the same when I was building YML.

Where, you know, you’re scrappy, you’re like doing deal flow. And, you know, you created your office within your home. And, you know, these are not like pretty things, but that’s what the founders have to do, right?

And whenever I asked you any question, right? Like, and this is just my style of investment, which is sometimes I invest and I try to like observe the founder, how consistent they are, right? Like, they said something they’ll do.

And then did they do it? And if they failed, it’s okay. But did they have a good reason of why they failed?

What they learned? How they are not going to do it? Like, one of the things I observe is, if people who, you know, who can think something, and they say something, and then they do something, if all of it is in sync, I have deep respect for those people, right?

And I think you remember, I had like a deep dive with you for two hours. I’m like asking every detail of, you know, like, how much have you invested in the company? Why did you choose this company?

Why did you not choose this company? How do you manage cash flows? What are the challenges?

And what I realized over, you know, the past one year or so, you’ve been consistent, and which I love. And another thesis was how you go early with startups. And you are also taking some chips off the table until they go IPO or, you know, wherever they go, which obviously is a good idea, in my opinion.

Because with the ChatGPT era, the risk is massive, even for highly scaled companies. So, you know, your thesis is very good.

Siddhartha Ahluwalia 44:13
Thanks and super grateful for the partnership.

Ashish Toshniwal 44:16
Yeah, man.

Siddhartha Ahluwalia 44:16
I’m grateful for your friendship.

Ashish Toshniwal 44:18
Absolutely.

Siddhartha Ahluwalia 44:19
Super grateful for your trust in me on with, you know, your heart.

Ashish Toshniwal 44:24
Absolutely. Absolutely. I think you guys are going to crush it.

Siddhartha Ahluwalia 44:27
One thing I wanted to check with you, right? How you have done post your making your money in public markets and private markets? Can you share some numbers for our audience too?

Ashish Toshniwal 44:38
So, I would say, when you talk about money, right? Like what money does, right?

Siddhartha Ahluwalia 44:44
Maybe you can start with what is money for you?

Ashish Toshniwal 44:47
What wealth enables. And so after leaving YML for two years, you know, I did nothing. One year I was in Bangalore, moved there with the whole family.

And what I’ve realized is what wealth or money does to you is unlike a lot of people who think wealth changes you. In fact, I believe wealth makes you even more of who you are, right? But then you don’t have to pretend, you know?

And you project who you are already. Like for instance, if you are, you know, a decent human being, you become even better and you become more generous and, you know, that’s who you are. And the opposite is also true.

And I think what wealth does is gives you the freedom to pursue what you want to do rather than what you have to do. And most people, you know, unfortunately, they are in a job because they have to be in a job rather than they want to be in a job. So, I think that’s, you know, the hallmark of wealth in my opinion.

And, you know, as Warren Buffett says that like 99% of what he does most people can do, right? Maybe like his private jets and, you know, some of the other luxuries he has, very few people can afford. But at the end of the day, how important is that, right?

So, you know, that’s what the deal is with wealth. And when you talk about like public markets and, you know, private markets, I feel wealth generation is, you know, you may earn money through your job, equity, whatever it is. But if you can compound wealth over a long period of time, I think in a lifetime, if you live like an average person, you can build a lot of wealth, in my opinion.

Like for instance, I have been very exposed to public markets. And I have done over like 60 investments in startups and stuff. And my strategy has been that how do I take concentrated bets in public markets, which again, can be risky.

And, you know, I’ve realized like investing in public markets is a game of stomach more than brain. And if you don’t feel great about your investment during drawdowns, then you should not be investing like that, right? Like and people who can double down in their investments during drawdowns are the ones who should take concentrated positions.

So, that, you know, has been my strategy overall.

Siddhartha Ahluwalia 47:42
Maybe you can share like the top four stocks that made you the most amount of money.

Ashish Toshniwal 47:47
I mean, the usual suspect, Nvidia, Tesla, and Meta. These three, I would say.

Siddhartha Ahluwalia 47:53
And when did you start investing in them?

Ashish Toshniwal 47:55
So, Tesla, you know, I am an early adopter of all things Tesla since 2013-14. In fact, when I bought my first car, I would drive to San Francisco. And when I come back, tourists would be taking pictures with the car.

It was that early, right? And so, Tesla is no doubt like, you know, has done very well for me overall. And then, you know, Meta because I totally believe in how Zuckerberg runs Meta and Nvidia.

Siddhartha Ahluwalia 48:29
And Meta was in which year?

Ashish Toshniwal 48:31
So, Meta, I’ve been an investor since 2016-17. And, you know, it’s not like you just invest once. You invest at different stages, you know, the whole window of time.

So, and Nvidia, I have loved like what Jensen Huang has done over the years. And so, I’ve always invested in Nvidia. But Nvidia is also a stock which has seen a lot of XXXX and drawdowns.

And the question is, most people get scared during that time, hence the drawdown. But if you can double down during that time, I mean, that’s, you know, how you can…

Siddhartha Ahluwalia 49:11
The common thing I found among all these three companies are they are still founder-run.

Ashish Toshniwal 49:15
That is actually very true.

Siddhartha Ahluwalia 49:16
Would that be your strategy?

Ashish Toshniwal 49:17
That is absolutely a big part of the strategy because, number one, they own a big chunk of the equity. And number two, what I have felt is founder-CEOs, they are not trying to do political things.

Siddhartha Ahluwalia 49:33
Like shareholder maximization.

Ashish Toshniwal 49:35
Like they are going all in with their beliefs rather than show to the world how great they are or play it safe. And, you know, it has been proven over and over again, right? Whether it’s Steve Jobs, Jensen Huang, Mark Zuckerberg, Elon Musk, they have turned things around during crisis.

Siddhartha Ahluwalia 49:55
But one thing to remember about these companies is, like they were private companies like not very long ago. Especially Tesla.

Ashish Toshniwal 50:05
Correct. Yeah, absolutely. Absolutely. And, you know, that has been…

I would say it’s like if you can make concentrated bets, that’s great. But it’s very hard to handle drawdown times. And if you can do that, just put it in SP500, S&P 500.

I think 95% of the people cannot beat S&P 500 today.

Siddhartha Ahluwalia 50:33
Like how much IRR would you have delivered till now, in the last 6-7 years?

Ashish Toshniwal 50:38
I think my public market returns have been close to like 19-20% IRR. And again, you know, I don’t think I’ve done, you know, rocket science here. It’s Elon Musk and Zuckerberg and Jensen Huang has made me a lot of money.

Siddhartha Ahluwalia 50:59
Ashish, there’s a popular thinking that becoming a founder has become easy in the AI era. But you think that building a business has become more tougher. Why is that?

Ashish Toshniwal 51:11
So, I think building products have become easier. Time to market is easy, which means you can get an idea to the end goal very fast. The reason why I feel building a business is tough, because the bar of success has moved up significantly.

Siddhartha Ahluwalia 51:30
What do you mean by that?

Ashish Toshniwal 51:32
Anytime you launch an AI product, you know, the consumer or anyone is like, why can’t I do it with the ChatGPT? And that’s actually great, right? Like, if your product is not 10x better than ChatGPT, and it’s just 1 or 2x, you have no chance.

Because, you know, the muscle memory of people is like, I’m just going to go to ChatGPT. And it’s like, yeah, it’s better, but it’s not that good. So, I’m just not going to use it, right?

Like, in fact, I’m launching another startup right now, which is on this thesis, which is today, when you look at there are three things, which has progressed AI, which is data, compute, algorithm. I think a lot of data is already out there. Compute and algorithm is leapfrogging each other, which is why you see ChatGPT 5, I mean, GPT 5 and O3 Pro and like, you know, it will keep happening, it will keep getting better.

But if you look at AI businesses, which have done very well, you know, from monetization standpoint, one is coding agents, we know it has done well. The second is this bucket of, you know, companies…

Siddhartha Ahluwalia 52:51
Data labeling.

Ashish Toshniwal 52:51
Data labeling, annotation, data eval sets, which is scale AI, surge, you know, even brain trust is actually doing pretty well. But beyond that, there’s not a whole lot of, you know, business success other than like, you know, product and all. And I believe that, you know, when the transition, what AI has enabled, I don’t think we have landed the plane on it yet.

And that is the big opportunity is, instead of workload, it is offering work getting done, right? And that’s one of the things I am actually exploring where I feel that, you know, if you look at a sequence of work, right? Let’s say there are five people involved, and the five people go in and out, and their input and output, they work with each other.

And then at the end of it, the work is done. I believe that a big chunk of that work, there will be, let’s say, 50 to 60% is done by agentic system. And let’s say there are five jobs involved.

Instead of five, they will all merge to maybe two jobs. And, but there’s still there will be people will be required to make sure the fidelity of the job is high, because there’s still challenges of hallucination and all that in AI. And I think that is a big market which will be unlocked.

And that’s what, you know, I am working on where I’m combining two, three jobs. And I’m offering that with, you know, an agentic layer. And let’s see, you know, the human in the loop.

I think that the human becomes a lot more scalable. And I’m not talking one or two x, I’m talking 10x, 20x.

Siddhartha Ahluwalia 54:47
But it’s a services company, right? At the end of the day.

Ashish Toshniwal 54:49
No. So here’s the thing. I think what happens is today, you have human in the loop.

But in one or two years, you know, that human may not be in the loop. But the people who will win the game two, three years from now are people who are on that journey. And who have built great businesses, you know, in that particular vertical, rather than thinking about what’s next when the human is not required.

Siddhartha Ahluwalia 55:18
Give me an example.

Ashish Toshniwal 55:19
Like, for instance, you know, today, if you look at, let’s say financial analysts, you know, or executive admin, right? In an executive admin job, there are different functions, whether it’s, you know, inbox shadowing, whether it’s expense reimbursement, travel booking, and calendar. Inbox shadowing is a harder job, because you have to understand company priorities, relationships, this, that.

Calendaring is also challenging, where you have to understand conflict management, priorities, you know, who’s important in the meeting, time zones. But if you have human in the loop, you can, at least the agents can do the simple, you know, calendaring. Not like multi-agent, multi-time zone things.

And then expense reimbursement totally can be done by, you know, agentic solution. So if you look at this job, it can very well be that there’s a chief of staff, an executive admin, and personal assistant combined together. And the agents are doing the simple transactional task.

And, you know, you’ll have like a…

Siddhartha Ahluwalia 56:40
So you believe people will outsource this three functions into one to AI services company?

Ashish Toshniwal 56:46
AI, I don’t want to call it AI services company, but definitely, you know, it will be a new genre of whether the human in the loop is provided by the service or provided by the company itself. I don’t know, but like I know that that’s going to happen. Like even if you look at customer service today, right?

It’s not like these companies are launching things and like you don’t need customer service. The customer service people are the human in the loop. Yeah.

So it’s not about like offering the human, but there will be human in the loop. Yeah. So that’s how I am thinking about like building…

Siddhartha Ahluwalia 57:29
Our enterprise validating it because the first company that you built, right? You for three years built wonderful apps. But then companies came to you to tell you the truth that, hey, we want the same quality of apps that you have built, but for our own purposes.

Ashish Toshniwal 57:45
Yeah. See, that’s where I believe today is like a lot of AI companies you know, they’re getting great funding and they are building great wrappers around LLMs. And look, they’re going after good use cases, which is the reason they’re getting good traction. But I feel if you don’t create enough of a deep expertise in a certain area, you know, ChatGPT, Anthropic, they are going to cut into you, which you are seeing probably with coding agents, you know, Windsurf and Cursor.

Clearly, they have grown very fast. But I expect ChatGPT and Anthropic are not going to sit around and like, you know, just hear the music. And that’s going to happen with a lot of startups, I feel.

So that is one. And second, I would say is like, I don’t think ChatGPT, whose ambition is AGI at the end of the day, they are going to focus too much with human in the loop.

Siddhartha Ahluwalia 58:50
I personally think ChatGPT, OpenAI and Anthropic are the most hungry companies the world has ever seen because they’re going to eat forward and backward revenue. And their goal is to become like $10 trillion companies. What it means is they’ll become them.

So the cloud companies also, they’ll be like when Sam Altman has built a nuclear plant, the next step is to build a cloud company. They’ll build their own cloud services, cloud companies, and they’ll build their own applications also. That’s the only way.

Ashish Toshniwal 59:23
I mean, that’s how you, you know, you build MOATs, right? If you have just one part of it, it’s easier to go up against you. But ChatGPT is certainly like, you know, once in a lifetime type of a company which is built.

So I agree with you. But at the same time, the big techs are also like, look at like how much transition happened in Google over the past one year. You know, this is the first time someone has challenged them in a way where they are transforming their organization in a big way.

I believe that the startups who are building deep expertise in a smaller vertical are the ones who will do very well rather than going after broad.

Siddhartha Ahluwalia 60:14
Do you think the horizontal ones might not be able?

Ashish Toshniwal 60:17
Might not be. And even if they find success, I think the success may be short-lived because they will face massive challenges from entropic and ChatGPTs of the world. That’s what I think.

And also one more opportunity I’m seeing is today, we, you know, hear a lot about Ejected Solution. It’s everywhere on social media. Obviously, it’s an obvious opportunity.

But what not a lot of people talk about is building agents who can do meaningful work is very hard because it lacks context. It doesn’t have enough data, you know, and how do you train an agent like day one where they are very effective in a certain task? No customer will use it unless they have some level of efficacy, which honestly is very hard today. You know, we talk about like, LLMs are so, um, you know, powerful, which they are, but how, how do you test the boundaries of that power is by creating synthetic data or real data, and you keep iterating and, and you see that like beyond this LLMs can’t go, hence you add annotation, hence you fine tune the models. But like this whole iteration and providing real data or synthetic data, this whole infrastructure is not very mature.

Hence building an agent, you know, who’s, um, who’s like three years old is easy, but building an agent who’s 18 years old, it’s hard.

Siddhartha Ahluwalia 1:02:04
So you’re saying the agent is as good as the data that it operates on.

Ashish Toshniwal 1:02:08
Data in real world scenarios, it’s, it’s, you know, it’s, you know, building like a deep research agent is, is, is done by open or open AI or ChatGPT. So it’s hard to build a real business there because ChatGPT will go after that.

Siddhartha Ahluwalia 1:02:26
Amazing thoughts on that. You know, the world is yet to play out. I think the next few years are the most exciting years because in such the turmoil, maybe you had seen in the internet era, the highest amount of wealth gets created in an ecosystem.

Ashish Toshniwal 1:02:40
A hundred percent, man. In fact, I’m feeling the same in 2009, 10, 11, like iOS engineering was the hottest thing on earth, right? Right now it’s AI engineering, of course.

And you know, we are also trying to build our team here and we are hiring AI engineering and it’s not been that easy, like finding the right person because anyone who says they have experience in AI engineering for the past 10 years, I don’t know how much I can believe them because the field is so new, right? And someone who has actually built great products for the past two years, there are very, very few people.

Siddhartha Ahluwalia 1:03:26
Yeah. That’s where there are only a hundred engineers who have like done extremely deep work across these.

Ashish Toshniwal 1:03:33
These are the AI researchers where everyone is going after them. I mean, they’re like a startup. Each person is a startup in itself.

So.

Siddhartha Ahluwalia 1:03:44
It was super cool, Ashish. I enjoyed a lot, learnt a lot in this entire process of researching about you and doing this conversation. I have known you for a while, but the fact that I’m amazed.

Ashish Toshniwal 1:03:55
No, I enjoyed our conversation too, man.

Siddhartha Ahluwalia 1:03:58
Thank you so much.

Ashish Toshniwal 1:03:55
Thank you for having me.