ElevenLabs CEO/Co-Founder, Mati Staniszewski:The Untold Story of Europe’s Fastest Growing AI Startup

What Drives the Growth of 11 Labs?

Company Growth and Funding

• 11 Labs has crossed 200 million in valuation, achieving rapid growth with a timeline of 20 months to reach 100 million and just 10 months to double that.

• The company raised $2 million during its pre-seed round at a valuation of $9 million, highlighting the importance of speed in execution and investment in the current market.

• Their largest contract is valued at around $2 million, primarily focused on call center customer support and personal assistance.

Overcoming Skepticism

• Matty discusses skepticism regarding building a global-scale company from Europe, emphasizing that while larger companies like OpenAI may enter the space, they lack certain readiness factors.

Personal Background Influencing Mindset

• Matty reflects on his upbringing in Poland, noting how it shaped his worldview and approach to company building. Growing up in Warsaw exposed him to broader possibilities beyond smaller cities.

• He emphasizes the importance of talent density encountered during high school as a motivating factor for exploration and ambition.

Motivation from Community

• Matty attributes his drive to family influences and community support. His older brother's journey abroad inspired him, alongside a network of talented peers who motivated each other academically.

How Did 11 Labs Begin?

Origins of the Idea

• The inception of 11 Labs was influenced by prior collaborative projects between Matty and co-founder Petra during hack weekends where they explored new technologies.

• They initially worked on various tech projects including audio analysis aimed at improving speaking skills before identifying issues with movie dubbing in Poland as a significant problem needing resolution.

Identifying Market Gaps

The Evolution of Voice Technology

Shifting Interaction Paradigms

• The interaction with technology is evolving, with voice becoming a significant interface, moving beyond its initial specific applications to encompass broader uses.

• Initial attempts to improve dubbing involved using existing technologies, but results were not satisfactory; thus, a reevaluation was necessary.

Research and Market Validation

• The research phase focused on understanding market demand for dubbing products by reaching out to YouTubers for feedback on potential interest.

• Initial responses from creators showed skepticism about the feasibility of dubbing solutions, with only a 15% reply rate indicating lukewarm interest in the concept.

Identifying Core Needs

• Conversations revealed that creators preferred simpler solutions like post-production corrections and script previews rather than complex dubbing systems.

• Acknowledgment of the need for an emotional text-to-speech model emerged as a priority over traditional dubbing methods.

Model Development Insights

• The decision was made to focus on developing new models tailored specifically for text-to-speech capabilities rather than relying on existing ones which were deemed inadequate.

• Investors are encouraged to assess whether problems require unique models or if they can utilize existing alternatives based on current technological limitations.

Current Trends and Future Directions

• As of 2022, there was limited public awareness regarding AI advancements; however, recent developments have sparked renewed interest in model capabilities.

• There is ongoing debate about whether scaling laws will continue to yield significant advancements in voice technology or if we are entering a plateau phase.

Incremental Progress vs. Adoption Rates

• While some areas like narration may be plateauing in quality improvements, overall AI adoption is still gaining momentum across various sectors.

Voice AI Development and Market Dynamics

Adoption vs. Development Progression in Voice AI

• The speaker discusses the differences in adoption rates between LLM (Large Language Models) and voice technology, suggesting that while LLMs may be progressing slowly, voice technology is still advancing rapidly.

• There is a notion of a "deeper understanding" emerging as various technologies combine, indicating an evolving landscape in voice AI.

OpenAI's Position and Competitive Landscape

• A conversation about why OpenAI hasn't pursued certain projects, with the speaker reflecting on their early discussions with Kieran regarding the potential for young innovators to succeed where larger companies might not.

• The speaker emphasizes that OpenAI lacks focus compared to their team at 11 Labs, which is dedicated solely to voice AI research and product development.

Team Composition and Research Excellence

• The speaker highlights the rarity of exceptional researchers in the voice space, estimating only 50 to 100 top-level experts globally. They express pride in having assembled a strong team at 11 Labs.

• Achievements such as advancements in text-to-speech and speech-to-text technologies are noted, with claims that they outperform competitors like OpenAI on benchmarks.

Product Layer Advantages

• The discussion shifts to the importance of integrating various functions into a cohesive platform for voice applications. The speaker argues that OpenAI has not invested enough time into this aspect.

• Emphasizing speed of execution and focus on specific use cases as key advantages over larger companies like OpenAI.

Talent Retention Challenges

• Concerns about talent retention arise due to competitive offers from major tech firms for skilled researchers. The speaker acknowledges the high value of early-stage talent.

• They believe that proximity between research development and deployment gives them an edge over larger corporations bogged down by bureaucracy.

Fundraising Experience

Funding Challenges and Strategic Decisions

Initial Investor Reactions

• The team faced skepticism from investors regarding their AI voice solution, which was considered a niche market at the time.

• They engaged with numerous investors (30 to 50), but most declined to invest, highlighting the difficulty of securing funding in early 2022.

Decision to Remain Independent

• After receiving an offer from a U.S. accelerator (not Y Combinator), they chose to reject it, believing they could create something more valuable independently.

• This decision led to increased financial pressure as they began spending on GPUs and hiring staff using personal savings.

Pre-seed Funding Round

• Ultimately, they raised $2 million at a post-money valuation of $9 million, giving away 11% equity to the first investor.

• The fundraising experience was recent (2022), contrasting with older startup stories often shared in similar contexts.

Building Infrastructure and Team Expansion

• The primary goal for raising funds was to accelerate development by building a small data center initially in Poland before moving operations to the U.S.

• They started hiring additional team members during this phase, which felt significant despite being only two new hires.

Product Development and Market Fit

Timing of Fundraising Announcement

• They raised funds in Q3 2022 but announced it publicly in Q1 2023, aligning announcements with product launches rather than just for publicity.

Shifting Focus Towards Narration

• Initially struggling with product-market fit while working on dubbing, they pivoted towards narration voiceovers where signals of market interest began emerging.

Key Milestones Indicating Product-Market Fit

• A blog post about their AI's ability to laugh generated significant interest, leading to over a thousand people joining their waiting list overnight.

• An audiobook author tested their platform extensively and received positive feedback after releasing content created through their service.

Launch Success and Momentum

• Following the public launch in January 2023, creators showed enthusiasm for the platform; media coverage further amplified this momentum.

Understanding Product-Market Fit

Understanding Product-Market Fit and Effective Launch Strategies

The Concept of Product-Market Fit

• The speaker reflects on the notion of product-market fit, emphasizing that while users loved their product, they did not consider it fully achieved until they could ensure long-term value for 5 to 10 years.

• They acknowledge being closer to achieving product-market fit but believe there is still significant potential for creating more value.

Lessons on Announcements and Launches

• The speaker advises aligning announcements with major news items or events rather than celebrating arbitrary milestones, as this can dilute the company's message.

• They stress the importance of focusing on user acquisition over media attention, noting that traditional press coverage often does not yield substantial results for first-time founders.

Importance of Community Engagement

• The speaker shares experiences from their beta launch, highlighting that engagement with niche communities (like newsletters and Discord groups) proved far more effective than mainstream media coverage.

• Platforms like Reddit and Hacker News were identified as valuable channels for spreading awareness among target users compared to traditional press outlets.

Fundraising Strategies Pre and Post Launch

• The discussion shifts to fundraising strategies, indicating that successful launches can attract investor interest; however, founders should focus primarily on product development during this time.

• It’s suggested that founders should line up potential investors ahead of time but avoid continuous fundraising efforts which can be distracting.

Engaging with Investors Effectively

• The speaker mentions maintaining relationships with a few key investors who can provide assistance without implying immediate fundraising needs.

Angel Investment Insights and Strategies

Importance of Angel Selection

• The discussion emphasizes the significance of evaluating potential angel investors beyond mere niceness, focusing on their ability to provide real value.

• Founders are advised to seek angels who possess domain expertise that complements their own knowledge gaps.

• It is crucial for angels to help validate the startup within specific circles, enhancing networking opportunities and credibility.

Fundraising Journey

• The speaker recounts a successful fundraising period from January to June 2023, culminating in a $19 million raise in June.

• The unexpected involvement of NFDG, a non-traditional fund for the speaker's network, highlights the evolving landscape of investment sources.

Investor Engagement Process

• Initial interest from investors began around March 2023, leading to strategic conversations about partnership rather than immediate funding.

• The goal was to attract globally recognized partners who could enhance the company's reputation and trustworthiness.

Unique Investor Interaction

• A notable interaction involved an investor who proactively tested the company’s APIs before expressing interest in investing.

• This investor provided valuable feedback on product functionality and demonstrated genuine engagement with the startup's vision.

Speed as a Competitive Advantage

• Speed is identified as a critical factor for both product development and securing investments; quick execution can differentiate successful startups from others.

Understanding Founders' Fundraising Strategies

The Road Show Phenomenon

• Founders increasingly prefer to conduct road shows, spending significant time meeting investors before deciding on term sheets. This process can extend fundraising timelines unnecessarily.

• Conversations with founders reveal a trend where they seek to optimize various factors such as valuation, dilution, and brand partnerships during fundraising.

Key Considerations in Fundraising

• Founders often lack clarity on what they are optimizing for—whether it's valuation, dilution, or the reputation of their investors.

• It is essential for founders to articulate their priorities clearly when engaging with potential investors to avoid confusion and misalignment.

The Value of Term Sheets

• Some founders may run road shows to compare term sheets without fully understanding the implications of their choices. This can lead to missed opportunities for genuine partnerships.

• Investors often provide term sheets before establishing a partnership, which raises questions about how founders assess the quality of these offers.

Exploding Term Sheets: A Double-Edged Sword

• Exploding term sheets are controversial; while some understand their purpose in creating urgency, many dislike them due to the pressure they impose on decision-making.

• The use of exploding term sheets can sometimes backfire, as early investors risk being used merely as leverage against other offers.

Cultural Differences in Investment Approaches

• There appears to be a cultural divide between American and European VCs regarding risk tolerance and investment strategies. U.S. investors tend to favor larger bets rather than focusing solely on minimizing risks.

Insights on Company Culture and Team Dynamics

Positive Investor Relationships

• The speaker reflects on positive experiences with investors, noting their support during challenging times, which was even more pronounced than during successful periods.

• A specific mention of Brian Kim highlights his effectiveness as a lead investor who successfully retrieved funds for all involved, showcasing his dedication and quick action.

Team Structure and Size Preferences

• The discussion shifts to the preference for small teams, emphasizing that larger teams do not necessarily solve problems effectively.

• The organization operates with around 250 people but functions through approximately 20 small teams (5-10 members each), allowing for rapid execution and high ownership over projects.

Organizational Structure

• Teams are organized by product areas rather than strictly by function, promoting independence in execution while maintaining focus on specific projects.

• Examples include dedicated teams for various components like studio interfaces and voice agent suites, ensuring specialized attention to different aspects of the product.

Challenges in Company Culture

• The speaker recalls moments of tension within the company culture due to misalignment between research, engineering, and market strategies.

• A significant low point occurred when an enterprise client released a dubbing solution before the company could launch its own version, leading to morale issues among team members.

Lessons from Competitive Pressure

• The premature release by a partner caused frustration as it overshadowed the company's planned launch timeline and undermined their narrative about innovation in dubbing technology.

How to Recover from a Major Setback in Business?

Authenticity in Leadership During Crisis

• The initial reaction to a setback should not be to downplay the situation; authenticity is crucial. Leaders should express their feelings and acknowledge the gravity of the issue.

• It's important to process emotions like anger and frustration before moving on. Discussing what went wrong can provide valuable insights for future actions.

• Transitioning quickly from emotional processing to actionable steps is essential. Relentless execution will eventually demonstrate recovery and improvement.

Balancing Speed and Quality in Technology

• In today's tech landscape, both speed of execution and quality of research are critical differentiators for success. Companies must excel in both areas.

• Investing in research provides a competitive edge, allowing companies to stay ahead for 6 to 12 months depending on the use case.

Infrastructure Decisions: Building vs. Renting Data Centers

• The decision to build proprietary data centers stems from long-term cost efficiency, especially when training models continuously.

• A break-even point is anticipated within two years by owning data centers, which allows for quicker experimentation compared to renting infrastructure.

Unit Economics in Emerging Tech Companies

• Many tech startups face criticism regarding poor unit economics; however, there’s potential for optimization as models evolve over time.

• While some companies may struggle with margins, others could emerge successfully due to strong brand trust and customer loyalty.

Market Dynamics and Future Outlook

• Despite challenges, there’s optimism that multiple companies can thrive within a large market space; innovation will determine winners and losers.

Discussion on Market Strategies and Company Structure

Ambitious Market Positioning

• The application discussed is seen as an ambitious bet against major companies like Google and Firebase, highlighting the competitive landscape.

• The speaker notes the difficulty in recalling Google's product name, emphasizing brand recognition challenges.

Targeting Customer Segments

• Anton, a marketing expert, is praised for his approach; however, there's advice to focus more on targeted customer segments rather than a broad market strategy.

• The importance of identifying a clear Ideal Customer Profile (ICP) is stressed for new launches.

Horizontal vs. Vertical Strategy

• A horizontal approach may be acceptable if launching something innovative without a defined customer base; otherwise, vertical targeting is recommended.

Organizational Structure Without Titles

• The decision to eliminate titles within the organization aims to prioritize impact over hierarchy and avoid distractions related to title assignments.

• In small teams, everyone can contribute significantly from day one; titles could limit potential leadership opportunities based on tenure rather than capability.

Talent Development Focus

• There’s a conscious effort to grow local talent instead of solely recruiting experienced individuals from outside markets.

• Mentorship from seasoned professionals is sought to aid in developing internal talent while fostering growth within the organization.

Building in Europe: Challenges and Opportunities

• Building tech companies in Europe is described as "hard mode," but there are significant advantages such as access to incredible talent.

• Many talented individuals seek opportunities with ambitious European companies due to limited options locally compared to U.S. firms.

Global Aspirations vs. Local Focus

• There's an emphasis on building globally while being based in Europe; the goal is not just serving the European market but competing worldwide.

Hiring Insights and Company Growth

The Importance of Team Commitment

• The speaker emphasizes the value of finding dedicated team members, noting that some employees from the West Coast of the US and Central Eastern Europe may not exhibit the same work ethic.

• They highlight a group of "true missionaries" who are deeply invested in the company's success, working beyond just their job requirements.

Hiring Challenges and Strategies

• The discussion shifts to hiring practices, mentioning how early on they relied heavily on outbound recruitment due to low inbound interest.

• Acknowledging past mistakes, the speaker reflects on taking too long to separate from underperforming hires, suggesting quicker decision-making is crucial.

Evolving Hiring Practices

• As the company grows (currently at 250 employees), they still prioritize interviewing all candidates to maintain quality control in hiring.

• There’s an increasing focus on engineering skills across all roles compared to previous months, indicating a shift in hiring priorities as they scale.

Future Growth Projections

• The company plans significant growth, aiming for 400 employees by year-end with ongoing recruitment efforts across various global locations like Brazil and Japan.

• They aim to build small teams or outposts globally while maintaining efficiency in operations.

Revenue Metrics and Business Strategy

• Long-term revenue per head is a key metric for assessing company efficiency; current figures indicate strong performance but require careful management as new hires come onboard.

Business Insights and Future Projections

Overview of Business Operations

• The company focuses on building a conversational agent platform, which is crucial for large enterprises, representing the majority of their business.

• Their largest contract is approximately $2 million, primarily serving sectors like call centers and customer support through various integrations such as speech-to-text and text-to-speech technologies.

Key Clients and Partnerships

• Notable clients include Cisco, Twilio, and Epic Games, indicating significant deployments in enterprise solutions.

• The company aims to scale from $200 million to potentially $300 million in revenue within a short timeframe, reflecting ambitious growth targets.

Financial Strategy and Fundraising

• Recent funding rounds occurred when the company was generating between $100 million to $120 million in revenue; they secured funds at a valuation of 3.3 times their revenue.

• The fundraising strategy emphasizes accelerating product development and expanding internationally while enhancing enterprise functionalities.

Balancing Growth with Core Focus

• The challenge lies in managing new initiatives without distracting from core operations; successful expansion requires careful consideration of resource allocation.

• They aim to innovate product experiences while maintaining focus on essential services that benefit users directly.

Future Revenue Streams

• There is potential for multi-billion dollar revenues from voice agents designed for customer support management, suggesting untapped market opportunities.

• Expansion into omni-channel solutions (e.g., email integration, WhatsApp integration) could further enhance service offerings beyond just voice agents.

Industry Dynamics and Employee Integration

• Current partnerships with companies like Decagon are strategic; however, future directions may lead to overlaps depending on verticalization strategies.

AI and the Value of Domain Expertise

The Role of AI in Automation

• The discussion highlights how AI can assist with simpler tasks, leading to increased automation. As this trend continues, the value placed on individuals with domain expertise will grow.

Impact of Investment on Company Perception

• The speaker reflects on their experience with A16Z as an investor, noting that it significantly enhanced their company's reputation among clients and investors alike.

• SEOA's involvement in Series B further solidified this positive perception, making it rare for companies to have both A16Z and SEOA as investors.

Acquisition Offers and Strategic Partnerships

• The conversation shifts to acquisition offers received by the company. While they did receive offers, the focus was more on understanding the process rather than pursuing a sale.

• The largest offer lacked financial backing but led to discussions about potential strategic partnerships instead of outright acquisition.

Confidence in Company Growth

• Despite initial temptations from acquisition talks during Series A, the team decided against selling due to a clearer vision for their future growth.

• They emphasize confidence in their business model and strategy moving forward, especially after experiencing secondary liquidity options for employees.

Financial Security vs. Aspirational Goals

• Secondary offerings provide liquidity for employees, allowing them to feel secure while betting on larger outcomes for the company’s future success.

• There is a recognition that while financial stability is essential (e.g., covering basic living expenses), aspirations extend beyond mere financial security now that foundational needs are met.

European Companies and Market Perceptions

• The speaker reflects on how many promising European companies might not have sold if secondary liquidity options had been available earlier in their development stages.

• This shift could potentially reduce greed-driven decisions by alleviating some risks associated with financial pressures.

Quickfire Round: Insights into Technology Trends

Beliefs About Company Building

• When asked about disbelief around building global-scale companies from Europe, the speaker acknowledges progress but notes skepticism still exists among many people regarding this capability.

Future Interfaces in Technology

• The speaker expresses a belief that voice technology will become a primary interface for interacting with various technologies—a notion likely contested by others in the field.

Investment Preferences Among AI Companies

Insights on AI Investment and Consumer Brands

Shifts in Investment Strategy

• The speaker reflects on their willingness to invest in products they frequently use, such as ChatGPT and Entropic, indicating a personal connection to the technology.

• There is a noted shift towards investing more in coding rather than consumer cloud solutions, with OpenAI focusing heavily on consumer applications.

Product Innovation and Research

• Previously, the company avoided product innovation if it conflicted with internal research initiatives; however, there is now openness to exploring external research for product development.

Favorite Consumer Brands

• The speaker expresses admiration for Eight Sleep and Google Maps as standout consumer brands due to their significant impact on user experience.

• If given the chance to be CEO of any company for a day, the speaker would choose Google or OpenAI, highlighting interest in innovative models like Google's Genie V3.

Perspectives on Google's Future

• Despite concerns about Google's ad model, the speaker remains optimistic about its future potential and acknowledges that Google is catching up in various areas.

Regulatory Insights for Europe

Proposed AI Regulation Changes

• The speaker suggests adopting U.S. AI laws within Europe to enhance regulatory alignment and ease implementation challenges.

• They propose creating an opt-in state within the EU that follows U.S. regulations to facilitate smoother adoption of AI technologies.

The Role of Founder Brand

Impact of Founder Visibility

• The importance of founder branding is questioned; while founders contribute significantly to company success, excessive visibility may detract from team efforts.

• There's recognition that balancing founder presence with team contributions can be challenging during rapid growth phases.

Advice on Risk-Taking

Reflections on Risks Not Taken

• A notable piece of advice from Peter Thiel emphasizes that not taking risks can be more detrimental than making poor decisions.