CoPilot AI builds amidst economic turbulence

How the SaaS startup opted to bypass venture capital and pursued generous non-dilutive funding from the Canadian government.

From left to right: Norbert Hung, controller; James Zhan, vice president of product and growth; Jesse Chen, co-founder and CEO; Shafin Tejani, investor and CEO, Victory Square Technologies, and Tasi Gottschlag, chief revenue officer. Photo: Allison Gacad

In March of 2023, PacifiCan rolled out its latest round of investments: $27.9 million, to be precise. One of the largest pieces of the pie went to CoPilot AI, a sales-enablement software company. The startup didn’t ride the funding highs of 2021, but as it’s proved with its $5 million in non-dilutive capital, searching for government money may soon prove an alternative model for startups — especially in a downturn economy.

Humble beginnings

Co-founders Jesse Chen and Henry Bee originally started up a fintech company out of Launch Academy in 2014. The two worked relentlessly on their product — risk management and portfolio optimization for investors, sold through financial advisors — even as their funds started to dry up towards the end of 2017. But their work ethic caught the attention of local investor Shafin Tejani at Victory Square Technologies.

“I was so impressed with the two of them,” said Tejani, whose firm shared an office with the startup incubator. “They were the first ones in the office and last ones to leave there, even on the weekends [...] We made an investment in [the team] in late 2017.”

The $1.5 million infusion was enough to pivot the company from fintech to SaaS. Since 2018, CoPilot AI has been in the business of sales enablement — supporting individuals and teams with tools to better prospect and close deals, largely through LinkedIn.

“When we actually went into this industry, it was quite young. There weren't many [sales enablement] options out there,” said Chen. “We didn't actually have a product to sell initially. We started off by validating [the idea], and we essentially sold this idea that [customers] could get warm leads cheaply because the service itself was relatively cheap, compared to how much it costs to buy ads, book a meeting room, and buy coffee and food. There was a lot of interest initially. We went from zero to $30,000 in monthly recurring revenue in a month.”

Eventually, the co-founders made use of AI to create a SaaS product that they could sell to clients. In those early days, the AI was able to categorize messages that differentiated between warm leads and cold leads, better equipping the salesperson for success.

Losing funding, but honing product

CoPilot AI achieved significant traction and tried to raise capital. By 2021, funding in the macroeconomy was abundant, and the team almost closed a deal. But Apple’s privacy changes related to data tracking that year increased the cost of CoPilot AI’s acquisition, said Chen. “From a growth perspective, that held us down.”

The company’s valuation took a hit and the co-founders lost their term sheet — but the moment allowed the team to reframe their business model. While the venture ecosystem around them pursued growth at all costs, the company decided to hone in on “humanizing AI” as its value proposition.

“Our tools are meant to help our customers to achieve their goals better,” said James Zhan, vice president of product and growth. “Specifically, how do you find better targets that match your desire? How do you craft better messaging and better ways to reach out to them in a personalized manner? And how do you get them on a meeting where you can close them — which is the same way as salesmen have conducted for thousands of years — but the ‘copilot’ part saves time with higher quality [leads], so you can do more with less?”

This, Zhan argues, is part of what set them up well for $5 million in funding from the Canadian government’s Jobs and Growth Fund.

PacifiCan and beyond

CoPilot AI only received the funding last month, but discussions first began in 2021. While Zhan praised the government staff behind the conversations (ex-founders and executives at IRAP and PacifiCan), he also described a slow burn to the process, including lengthy paperwork and lots of competition.

From left to right: Harjit Sajjan, minister of international development; James Zhan, vice president of product, CoPilot AI; Joyce Murray, minister of fisheries, oceans and the Canadian coast guard, at the announcement of PacifiCan's $5 million investment in CoPilot AI. Photo: CoPilot AI

At face value, the company seems to check all of the boxes for an ideal government funding award winner. Aside from proven technology in an appealing sector, it has an all-Canadian team of staff, from sales to developers — with some even repatriating from the Bay Area.

“The government [funding] was actually a direction that we pursued because of that ability to be patriotic [...] Jesse was always trying to build a Canadian technology company that's sourced in Canada,” said Zhan.

The Jobs and Growth Fund requires that the company hires locally but continues to expand internationally. Zhan is eager to grow the team under a new department of revenue operations — including sales, marketing, and account managers — all towards the goal of working with more enterprise clients, particularly in the United States. And eventually, Chen alludes, the company will be looking for a VC raise.

"This corner really feels like the startup corner," Zhan told me on a tour of the office – featuring members of CoPilot AI's video product team. Photo: Allison Gacad

“The way you show value a lot of times is to show revenue growth,” said Chen. “We don't grow revenue at all costs, but revenue growth shows confidence, and that shows product market fit. And so that's something that, at the end of the day, VCs still want to look for, and we're building on the momentum we have: what we call sustainable growth.”

Reflecting on the process

In hindsight, it’s easy to reflect positively on how things have played out for the company. CoPilot AI may have dodged an overblown valuation in 2021 and is now set up well for whatever the economic headwinds may bring.

“I think we've avoided bringing on any investors that would have had misalignment: ‘Growth at all costs,’” said Tejani. “There have been parties circling, and [they] are always circling, especially when you have good revenues [and] a good team, and especially right now AI is hot.

These are really important periods to happen, because what it does is [help these] real builders [to] keep building,” said Tejani. “This year and next year — it's an opportunity to go on offense, while everybody's sitting in the fetal position because of all this uncertainty.”

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