To our Investors,
This letter contains three key parts:
In addition, it wouldn’t feel like an Air Investor Update if I didn’t include at least a few videos that captured life at Air during 1H 2024 (😉).
CreativeDifferences_TRAILER_003 (1).mp4
The team and I are thinking deeply about our next fundraise and so the sole focus of this letter is to evaluate a potential investment narrative. We’d love to use this time to critique the early draft. As you read, I hope you find clarity of thought. I expect you to question all of it. I’d love to understand specifically where you disagree.
My only ask for you is to help us prepare. Your time, feedback, and perspective have carried us this far—let’s use it once again to analyze the business at this critical juncture. As always, I’m available around the clock should you have any questions.
Take care,
Shane
<aside> 🎯 We sell a Creative Ops platform (infrastructure) through a land-and-expand sales motion.
We’ve created a new category in enterprise software. Creative Operations is Digital Asset Management (”DAM”) + Creative Workflows.
Customers hear about Air through organic content and word-of-mouth. They use our free or self-serve products to optimize their creative workflows—collecting, approving and sharing content with ease. At a critical moment in their journey (when they have added 3+ team members or 1,000+ assets), users decide to bring on Air as their DAM to store and organize all of their visual assets. At this point, Air becomes core infrastructure for their business.
No DAM has ever had a billion dollar exit. This is because the traditional DAM sales cycles are too long to justify the ACVs and compound growth. Air has broken this cycle: creative teams quickly find value in our workflow tools and convince their colleagues that Air should expand into DAM use cases. Similar to Salesforce, GitHub or other systems of record, data lock makes Air extremely retentive when it becomes core infrastructure. Our gross retention for infrastructure customers is 96%.
The addressable market for Creative Ops is rapidly expanding. Today, most companies create and distribute thousands of images and videos to sell their product. Adobe estimates that 900M professionals use images and videos every day during the work week. In this world of endless content, companies of all size, scale, and industry need a system of record to manage creative work. At Air, no single industry takes up >11% of total ARR.
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Funnel Overview
The last six months were our MOI. We successfully navigated our constraints, and today we are chartering a path toward scaled, efficient growth. In H2 2023 we will prove that we are ready for the growth stage—raising a Series B and achieving hypergrowth lies ahead.
<aside> 📏 This infrastructure business is efficient and accelerating.
In H2 2022 we restructured our business. This decelerated growth, but rationalized our cost structure. Since that time, we’ve moved upmarket, optimized our growth channels, and rapidly invested behind our success to scale.
In H1 2024 critical product and go-to-market decisions inflected our growth rate (90%+ YoY ARR) and led to increasing rates of business efficiency (0.7x burn multiple). We doubled our marketing spend at the end of Q1 which increased our sales pipeline and highlighted our ability to drive venture growth at scale (214% YoY NNARR). This happened while we maintained world class unit economics at the top (<9mo CAC Payback), middle (<30 day sales cycle), and bottom (130%+ NDR) of our funnel.
August closed at $6.9M in ARR. We have 32 FTEs and generate $216k in ARR/FTE. At our current burn rate (~$320k/month) we are out of cash in July 2025. We added $1.2M in ARR in Q2 2024 and are profitable at $10M in ARR. We have high confidence that we could be profitable before we run out of cash.
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** Aug ‘24 actuals based on prelim financial close*
<aside> 🎯 New capital will unlock the ability to land infrastructure customers faster.
We’ve grown our infrastructure business by 153% YoY. These customers account for 70% of total ARR and logo growth has accelerated every month for the last 12 months. Our largest infrastructure customers spend $250k+ on the product, but the average ACV is $11k. Given the sales velocity of these deals, AEs can hold more opportunities than the typical SaaS business. Our 5 reps have a 5.25x Quota/OTE ratio and have averaged 90%+ sales attainment for the last 5 quarters. In order to compound growth, the key considerations are at the top of the funnel: can Air continue to increase lead volume and opportunity creation?
New capital allows us to dramatically expand our marketing motion and make dedicated investments into self-serve activation.
Given our push to profitability, our marketing budgets are currently fixed. Today, we don’t have the cash to fund lifecycle marketing tactics, SEO, ABM, or scaled investments in paid. Implementing these standard SaaS marketing practices would immediately capture leakage at the top of our funnel.
In addition, our obsession with efficiency and short term ARR growth has forced us to ignore obvious self-serve improvements. With a larger product team we would more effectively activate our free and paid workspaces. This would have a waterfall effect in infrastructure logo growth as the AEs would have a deeper active user base to target.
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