Clay, A Secret Weapon For Anthropic And OpenAI, Boosts Valuation To $1.3 Billion

3 hours ago 1

The seven-year-old startup took years to figure out its product, which uses AI to filter up better data on sales leads. Now it’s growing fast, with tens of millions in revenue and a valuation that’s doubled in six months.

_By_{Alex Konrad}_{, Forbes Staff}

When Clay CEO Kareem Amin logged off in September 2021 to embark upon a 10 day meditation retreat, he had the future of his business to think about. Four years of work on the New York-based startup had seen Amin tinker on a few ideas in pursuit of a grand vision of making programming more accessible for everyone, developers and non-coders alike. But Amin felt at a crossroads.

Clay had landed on a product that functioned as a no-code internal app builder for anyone in a business, be they an accountant, marketer or salesperson. A supercharged spreadsheet connected outside data sources for them in one spot; other software helped them manage workflows; another allowed them to program in whatever else they wanted.

But with users, one unglamorous application of Clay’s software was resonating above all: go-to-market efforts, centered mostly on the spreadsheet part. There, growth teams responsible for filtering up the best leads to their sales colleagues were collecting intel like what other software tools prospects were already using, who their own clients were and where potential decision-makers used to work.

This wasn’t the highest-impact use case that Amin could imagine. But it was what customers needed, he realized. Instead of building the biggest-possible tool, Clay just needed to build something useful. “I had this internal pressure of ambition about the kind of impact we could have in the world. We would switch from one manifestation of the idea to another,” Amin told Forbes. “Removing that, paradoxically, has allowed us to potentially realize that ambition.”

Narrowing Clay’s aperture from a do-anything, horizontal solution to one pointed only at growth wasn’t a small step. It meant axing the code tool and workflows, and losing clients. Amin’s cofounder and some early employees departed for other startup ideas. But the result was significant: an immediate and steady influx of customers, renewed investor interest and an ‘overnight success’ years in the making.

Today, Clay works with more than 5,000 businesses including AI shops Anthropic and OpenAI and software unicorns Canva, Ramp and Rippling. After increasing tenfold in the previous two years each, sales were up 6x for 2024, giving the startup about $30 million in revenue for 2024 at a minimal loss. (Contract sizes run into the hundreds of thousands of dollars per year.) Then there’s the ecosystem that has emerged around Clay: far beyond its own 95 employees, Clay maintains a Slack channel of 18,000-plus users. More than 90 small consulting agencies make a living — in several instances, more than a million dollars — helping other businesses use Clay.Investors who once had to defend their bets on the business are now eager to pour more funds into Clay. The most recent: a new $40 million investment in Clay that values the business at $1.25 billion – more than doubling its valuation in just six months.

Led by Meritech, the new investment in Clay is an extension of the company’s $46 million Series B raised at a $500 million valuation in June. But Clay hasn’t touched any of that money, Amin said; while the company could’ve perhaps reached a higher price tag with a formal fundraising process, the startup prioritized familiarity and speed. Business Insider first reported in October that Clay was raising additional funds.

“We didn’t need to raise, but our investors were seeing our traction, how we’ve been growing, and they wanted to double down,” Amin said. “This allows us to invest in our sales motion, working heavily on our product very quickly, and just focus.”

Clay’s trajectory to fast-growing unicorn status after years of a slow burn has proven early backers prescient. But how Clay uses generative AI – both within its own product and through AI agents used by customers – makes it stand out as an early success story for businesses looking for real-world use cases of a new technology that generates dollars, not just hype.

Already handling the licensing and collection of outside, third-party data for customers, Clay has capitalized on improvements in AI to supercharge those efforts. Clay’s software can now do some of the work for the user, predicting what data points and patterns might be valuable. Its AI agent, called a ‘Claygent’, can take a potentially valuable but complicated question, such as finding every previously disclosed customer of a company, or every person on LinkedIn who worked in certain roles at that company over a specific time period, and return just the results.

Clay’s software can also return surprise insights that its users would never know to ask for otherwise. Intercom, the customer service software unicorn, discovered that businesses whose websites mention the word “fertility” were likelier to need Intercom’s software tools, regardless of whether they hailed from healthcare, ecommerce or personal devices.

“That’s something we would’ve never figured out before,” said Intercom director of revenue operations Alexander DeMoulin. “It’s giving access to an entirely new paradigm of data.”

Helping companies sell might not be jaw-dropping work. But every business has to do it. And for Clay’s CEO Amin, that kind of result is motivation enough. “Every company needs to grow, and they need to grow in a way that is very specific,” Amin said. “We co-create that with them.”

Amin earned the extra time to figure out Clay’s product direction through experience building and selling a previous startup. Born in Egypt, he got his first entrepreneurial experience while living with his doctor father in a compound of mostly-expat employees of a hospital in Saudi Arabia. Placing an ad in the community’s local newsletter, he fixed computers for cash despite lacking formal expertise. “It was mostly reinstalling Windows,” he joked.

“People would ask me, who are those guys you keep visiting out in Brooklyn? What are they doing?”

After studying electrical engineering and physics at McGill University in Canada, Amin launched a startup with a friend and classmate, Nicolae Rusan. First a news and content aggregator, the New York based business went through accelerator TechStars Seattle, pivoted to ecommerce under the name Frame and was acquired by fellow startup Sailthru in 2012. From there, the duo went into media at Dow Jones, where Amin worked for two years as vice president of product at The Wall Street Journal.

By 2017, they were working on what would become Clay. Initially a tool focused on helping developers do more with APIs, Clay raised funding from local investors including BoxGroup, Boldstart Ventures and First Round. Over time, the small team shifted focus to no-code internal software, a hodgepodge of the app-making of Retool, integrations of Zapier and spreadsheet convenience of Airtable.

But Amin’s approach, running small experiments and then tweaking the product direction accordingly – which he’s described as more like growing a garden than crafting an object – took patience. “People would ask me, who are those guys you keep visiting out in Brooklyn? What are they doing? And I didn’t always have a good answer, but I thought, ‘they’ll figure it out,’” said Boldstart investor Eliot Durbin.

When Clay raised a Series A led by Sequoia in 2019, the figuring out hadn’t happened yet. Amin didn’t announce the funding, preferring to keep the startup low profile. His cofounder Rusan had already flagged the go-to market users as a promising direction. But Amin kept circling to what seemed like bigger opportunities. “We weren’t very opinionated,” admitted Amin.

But it was a journey that he, and Clay, needed to ultimately settle upon that more narrow direction with conviction. “I had to go through this experience of frustration to really learn the lesson for myself,” Amin said.

In the wake of the refocus, Rusan and others left. In came Varun Anand, a former press aide for Hillary Clinton’s presidential campaign, as a new cofounder. The duo got to work on streamlining Clay to go deeper with data providers, some exclusively, and remove integrations and dead weight that the product no longer required.

Whereas other businesses charged per batch of leads or seats, Clay charged by consumption of the data, a choice that Anand said better aligned it with customer outcomes. “We became the distribution engine for these data companies,” said Anand.

They knew they were really onto something when the first ‘Claygencies,’ specialists making a living teaching others how to more effectively use Clay, started popping up and flourishing. Anand had found Clay through a Slack channel for no-code software enthusiasts; a new channel just for Clay users started adding thousands of practitioners comparing notes on their results. “Everything in this market was point-solution based, but when we released a new feature, it was a primitive that could be tailored to your business,” Anand added.

Years after its start, but just months into its new purpose, Clay’s software was now selling itself, its practitioners bringing it with them to new jobs. “The strength of product-market fit they have is in the top fraction of the top 1% of companies scaling up in technology today,” said First Round’s Brett Berson, who published an in-depth analysis of Clay’s product journey last year.

“They have one of the most practical and exciting applications of AI.”

The explosion of generative AI, popularized by OpenAI’s ChatGPT, provided an accelerant. Early on, Clay launched a tool to allow users to create a formula with their data using plain language. And with them both as customers, Clay was able to build its own agent to work seamlessly with both OpenAI’s GPT models and Anthropic’s Claude. The tool’s ability to interpret user questions and surface surprising insights will only improve, Clay’s founders said, as the company focuses this year on connecting customers’ first-party data — valuable information held by and visible only to them — to power tailored outreach like pop-up websites personalized to a specific sales candidate.

“If Kareem was simply a go-to-market person, he would have just built a tool,” said Midas List No. 1 Alfred Lin, who works with OpenAI and now manages Sequoia’s relationship with Clay following the departure of initial investor Mike Vernal. Those years of tinkering on wider use cases, Lin argued, have now paid off as Clay’s software is more technically robust and capable of handling new AI features than a new entrant would.

In a highly competitive market – public company Zoominfo ($3.5 billion market cap) provides similar data, and other startups offer sales growth tools – Clay and its investors don’t have to worry about those AI heavyweights releasing copycats. At OpenAI, go-to-market systems lead Keith Jones said that his team used Clay in its workflows to launch and test new business-to-business sales tactics on a daily basis. “In my professional opinion they have one of the most practical and exciting applications of AI, in a decades-old practice that has long been stale,” Jones wrote in an email.

And while Clay may face a battle to expand its use cases within a larger organization, companies that start shaving several percentage points off of their operating expenses will be difficult to pull away from Clay, said Meritech’s Alex Kurland, who led the new funding round. “Nobody wants steak and martini dinners with sales reps anymore,” he said.

For Amin, Clay’s greatest moat is its creativity. Its community flourishes, he argued, because Clay creates new features alongside it. And Clay gives customers, in turn, a space to try things out.

It’s no coincidence, Amin said, that a large number of Clay employees like making music; its New York headquarters boasts a music room for monthly production sessions, where he’s learning from a senior engineer how to DJ (starting with the basics: electronic melodic house).

For Amin, working with Clay is like collaborating on a different kind of beat. “Without that degree of freedom, I wouldn’t be as interested,” the CEO said. “With music software, the deeper you get into it, the more powerful it becomes. We want Clay to be like that.”