How Faraday CEO Andy Rossmeissl grew Faraday to $9.1M revenue and 60 customers in 2024.

hello everyone my guest today is andy ross missile he's the leads the the company a company called faraday.io and it's mission to deliver practical powerful ai to consumer brands a designer by training and lifelong software engineer is responsible for the product strategy data science organization recruiting efforts and corporate matters previously andy founded the celebrated sustainability start a brighter planet and worked in politics andy are you ready to take us to the top sure you know so many smart people are moving out of politics i can't figure out why but uh here you are building faraday what's the company doing what's the revenue model how do you make money yeah sure so we um help consumer brands basically um predict things about what their customers are gonna do next um everything from lead generation and conversion through to who's going to you know be further engaged the customer or even down to retention issues and we're a sas platform charge monthly work in 12-month uh contracts that's great and typically kind of what pricing axes do you price around is it gmv total skus total data sources what is it yeah so uh mostly we price around just volume and usage so the number of different objectives the clients trying to predict um how much outreach is being done volume through apis and other kinds of things like that okay great and then i don't go down every customer cohort but what would you say on average an annual contract looks like to really use your platform aggressively uh it's a good question i mean so we we're not a cheap sas platform certainly but we're always going to come in under the cost of a single data scientist it's like the way we like to peg it yeah generally speaking under 150 000 a year yeah that's why you ask by the way i got the sense you weren't like a 20 a month product but you also weren't a million dollar a year product so about 150 000 acv somewhere around there yep yeah that's healthy good put this on a timeline for me when'd you launch the company so we started in late 2012 just six years here as a company of faraday started in vermont so taking you know a little bit more time and i think a lot of other tech platforms would but growth has been really strong over the last couple years it kind of entered a new uh new age here at faraday that's great and have you bootstrapped this or raised capital no so yeah we have had institutional backers from you know our first year to um a firm here in vermont called fresh tracks capital and our lead investors intercat oh that's great and so how much total capital the company to date single-digit millions single-digit millions okay great fair enough and then uh over that time span 2012 to today what's the team size like how many folks uh we've been hiring a lot we're up to about 25 this week oh that's congratulations and everyone based up there in vermont are spread out yeah we're on vermont except for one or two people who've had to move for family stuff okay that's nice you still figure out where to keep them on though oh yeah definitely that's good all right uh and what have you scaled to in terms of total customers on the platform we're right now with about 60 brands okay okay that's pretty healthy so this is like this is very much kind of a high touch model and right high touch you know high onboarding get gmv up and drive expansion yeah i mean yes you know i would say that we definitely try to stay away from too much consulting um you know we're a six to eight week onboarding process we don't charge for implementation so it's definitely important that we tend to keep things automated here customization on a per client basis yeah that makes a lot of sense and look i mean 60 folks that you know call it an ac of 100 grand that puts you around a six million dollar run rate is that directionally correct uh yeah single digit millions like i said and we're not quite at the sixth level yet though okay good is that what you feel like it's within striking distance or it's still a few years out yeah yeah definitely within striking distance like you look like a skier so like before you hit the slopes the next time you're going to have 6 million bucks an hour or no no definitely not we ski almost every day when we can't out here okay never mind then i i forget i forget about that you know for me i'm in austin so i'm waiting for like my first trip to like aspen or up to the northeast and that's still a couple months away so all right fair enough so six million in reach not quite there yet but healthy growth churn is critical in this kind of business how do you keep churn low um churn is just you know for us luckily we have time and it's really just about having the time and breathing room to have the deep conversations early on make sure that we're really understanding what exactly the client wants to optimize you know people often think they want more customers but what they really want is more customers that don't return products and spend at least a hundred dollars and you know fit a certain profile that they believe they're going to find a lot of growth in so it's really it takes a lot of time early on to really understand go to the heart of what the client needs because if we get that wrong then everything downstream building models assembling data deploying predictions it's all going to be against the wrong goal yeah so make sure to take time early upfront is important and then i would say also just um you know we have like weekly calls with almost all of our clients and it really helps us stay aligned with strategic priorities you know companies are changing every single month especially a lot of our clients fast moving you know direct to consumer brands and so we have to keep up with with the uh the brands change so when you look at it and kind of measure your ability to do that churn is obviously a good way to measure that so if you look over the past 12 months what does revenue churn look like today i can't talk about charge uh you know payback metrics are really healthy they're like uh much faster than average for uh for sas what would you say is average though everyone has a different meaning for average yeah i mean a lot of sas products that are acv you know there's so much time and energy put into sales and marketing that it can be over 12 months before you get payback and we're well under that now which is um which is healthy that's right so just to just to translate that you're for a hundred thousand dollar first year contract you're spending less than a hundred grand to get that deal of course yeah yeah definitely that's great and whatever whatever percent of the hundred grand you're actually spending where are you typically spending that besides kind of your sales team right yeah so um mostly a data science team um so we've got you know a group of phds here and other analysts who we have to deploy out to each account to you know get them on board and make sure we understand um their business and what to optimize and um then we also pay for a lot of data here at faraday and so we advertise the cost of all of our licensing out you know across our customer base you mean in terms of kind of buying sources from you know ad partners or you know consumer apps where people upload receipt data or things like that yeah i mean uh yeah so data sourcing for us is you know we've got a whole group here focused on that you know we we do consumer license data opt-in marketing data we don't do any social scraping so it means that we have to spend quite a bit of money to assemble what we call the faraday identity graph which is all 260 million us consumers and uh you know attach that to our clients data in order to make predictions yeah in terms of driving expansion revenue year over year so if i start with you as one of these brands at 100 grand per year um what are your strongest mechanisms to basically end up where my second year contract is 150 grand yeah so we focus as i said on the customer life cycle and generally when a client starts with us they've got one or two stages that are top priority so i might be saying we're really focused on you know growing our customer base and so lead generation would be maybe our initial objective with them um but maybe the next year they've grown very well and then their goal is really on ltv and really then it's just a matter of okay how can we engage their customer base more deeply how can we anticipate when people are ready to buy again and then that gives us an opportunity to say okay we'd love to do this for you guys we're already connected all your data and so we can uh we can add that on yeah that's interesting that's great i mean so how effective have well maybe i won't ask specifically about what expansion revert has been over the past 12 months but let me ask it a different way has expansion revenue more than made up for lost revenue so is your net revenue retention higher than 100 percent you know i think it's it's too early to say that i mean our the way that we're adding new clients on these days is so fast that anything would be talking about renewals at this point um it'd be hard to really compare um but that's certainly that you know negative net churn is certainly our goal a goal for us in 2019 yeah sorry what do you mean i didn't follow your logic there on terms of the new customer ads if you look at like your cohort that signed up over a year ago it just did those...