How Forge CEO Jim Crowley grew to $1.2M revenue and 10 customers in 2019.

hello everybody my guest today is jim mccrowley he's the co-founder and ceo of forge.ai a cloud-based data company that enables intelligent machines to auto autonomously perceive and reason across the ever-changing global flows of unstructured information before forge uh jim was very active in several technology companies from startup through either an ipo or acquisition by public companies like skyhook wireless he was the ceo a wi-fi location acquired by liberty media turbine m cube uh and uh network plus as ceo of data and communications which went public on the nasdaq jim you're ready to take it to the top let's do it all right man so first off tell us what forge does and what's your revenue model is it pure place ass so so forge what we chat what we are focused on is the issue well what does forge do number one the challenge is unstructured data intelligent machines machine learning rich analytical ecosystems cannot absorb that readily or easily it's very hard to do we close that bridge so people can analyze more build more models build them faster building better than they could before the revenue model that you asked about yeah it's a subscription-based revenue model uh we sell into the enterprises so 4ji is a subscription-based ai company okay and give me a general sense here we're talking 10 month customers or million dollar month customers what's the average customer pay per month or per year we're on the expensive side of that we're on the upper side of that of what you just arranged okay i mean do you think like 100 grand a year is like a fair starting point for most folks or where is it usually we're more than that we're less than seven okay less than seven figures so we don't we don't really get into the pricing models but um it's it's an expensive subscription-based model but pricing is important because obviously that drives your your sales model field sales inside sales no touch etc so it sounds like you're very much in the field sales outbound account based you are absolutely correct we we are we are direct sales uh enterprise sales people speaking to large financial organizations yeah put this on a timeline for me when you launch the company we launched about two and a half years ago okay so call it 2017. now it sounded like you have a hyper focus on the financial sector is that accurate and if so how do you drive customers that that is absolutely accurate a financial sector us means banked uh banks mutual funds hedge funds insurance companies and we are focused there because the financial sector to forge has invested a true tremendous amount of resources and uh infrastructure into the machine learning ecosystem so they're a ready customer of ours that's number one how we got our first customers we spoke to them uh we're out there talking to customers all day long about their problems and their challenges with unstructured information how they can model risk in the world differently how they can see change in the world differently uh they discovered what we were doing and where you we started from there be specific though right i mean every founder like looking back on your first customers you forget how tactical you had to be early on to actually land that first customer so when you say you just talk to people i mean who did you talk to what was the title how did you get their phone number their email yep uh it was classic sales outreach number one uh it occurred at a trade show uh where we reached out to this specific customer a very large financial organization and said this is the problem we're challenging how are you wrestling with it today uh they left at the problem they said could we start this in the next month and we had just started the company and we said well we don't even have a product yet uh so we had to uh let's keep talking and uh they became a customer about six months after that um what what gives them the confidence to sign i mean by the way contract values are pretty high i assume they were always high right including that first customer that first customer was very high as well what gave them the confidence to do that you're a startup with no revenue i mean you could go out of business tomorrow how i mean you must be a great sales guy uh well the the confidence is really based upon what we're doing for them number one we should we can show them exactly how we're solving the problem that we're facing that's number one two we have great financial backers so we're not going out of business tomorrow uh but have you raised that capital on day one well we already had seed capital that was significant how much uh we raised over three million in seed funding okay i mean that's that's some but i mean it's not huge especially for i mean basically the reason what i like to look at right relative to these ratios are essentially first year ac first customers relative to funding raised i mean if you've got a customer where you're selling a million dollar plan and you raise three million total i mean that's i mean that's a significant ratio i mean it's 30 percent of your total funding it's it's a significant ratio as i said where you you throughout the cove the number of a hundred thousand i said we're above that so we weren't at a million dollars with those customers but we were in the multiple hundreds of thousands of dollars with our first customers yeah i guess still though i'm trying to give you credit here and then deconstruct how you did it right that is still a large sale for a three million dollar funded company on day one but sure first i appreciate giving credit but let's talk about the problem uh how does one get the sell the issue is how are customers and wrestling with that problem today what do we leave what are we removing from that they had to do two key things the way organizations wrestle with this unstructured information problem today they throw huge numbers of bodies at it or they use relatively old archaic tools that let them do the scratch the surface of the problem we eliminate 4ji eliminates all of that so as a result we remove a tremendous amount of work that they had to do internally originally and then those resources can actually do the work they're supposed to be doing which is actually building models that look at risk that help them solve problems so to your specific question the reason we're able to extract the value we are is because of the value we're giving we're removing a very significant pipeline that people have to wrestle with today we let them go faster 4ji lets them model the world ways they couldn't do before and that's very valuable to our customers is it sticky so if you look over the past 12 months what's revenue churn been gross zero okay so you've had no customers downgrade we have no customer we've only had customers growing okay what is expansion typically like year over year on the historical cohort stuck on 30 growth 40 growth yeah we actually don't get that information out right now okay i mean is it because you're not measuring it or because you don't want to give it out for sensitive reasons we just don't give it out for sensitivity reasons we obviously measure a whole bunch of numbers yeah what what other numbers do you measure uh we measure revenue we measure cost of acquisition uh we we measure usage a whole number of different ways in terms of types of queries types of data uh we measure which usage which usage metrics do you price against do you so the prices mesh is essentially measured against the data collection that we're providing for our customers and what's coming into them uh so it's a cut we really have a number of different levels in terms of how we can price yeah but what's the actual metric though you say data but what's the it's it's it's the amount of data that we're sending to you and the latency with with which you want that data both those elements allow us to to meter the the prices based on yeah when you say amount of data right are we talking what's the actual unit of measurement is it gigabytes records queries per hour it would be it would be records okay okay so okay so amount of records over a given period of time sure and those records just to be clear the these are not like hubspot contact records these are more like company profile records or some other financial kind of record that's relative it's it's it's more than a hubspot record it's more than a uh the record is a very rich data structure uh that can change in size based upon the specific subject of the data record uh that could run anywhere from uh kilobytes to many many megabytes uh so it it it varies that's good okay so you price against that what about do you have feature based pricing upsells and then also seat based up selling or no so we have a number of features at our current stage we incorporate those features we are adding in in in our base pricing uh we are adding enhanced intelligence features which will create more upside for us as a business okay what about seat based up selling no or yes so we don't sell on a seat basis as i said the two key measures are data and latency of time okay uh very good um what about team size today how many folks we're 21. okay and you raised three million series a have you raised any uh since then and if so how much the the total raise for forge to date has just been north of 10 million is that too much uh i don't think so i think it the question of too much is relative it gives us the runway to keep maturing the business to grow the team to mature the platform and to keep acquiring some very very significant customers so it feels about right and uh so far we we're comfortable with it you've seen uh because you've done this many times before so you've seen patterns uh in c-suites as you've gone from nothing to nasdaq ipo when you typically raise and when you raised your last round what do you like to raise for in terms of months of burn is it is it 12 months right number 18 24 36 uh yeah i i would say 18 to 24 is is better than 12. uh the world moves pretty dynamically so i think more horizons better than less so okay the counter to that is if you raise a bunch and you plan for 24 months of burn you're giving up extra dilution versus growing valuation with less money in first and then raising out a better valuation giving up less equity so where's the balance the the balance each and my belief on the balance of that each entrepreneur needs to make their own yeah i'm asking you about you you've seen the most and and and i don't know if i've seen the most but for me the valuation is is a function of uh the complexity of what you're doing forge is dealing with very complex technologies which necessarily could create result in any number of swings so you have to risk adjust based on how your technology can develop versus how you can think the market can develop and for us that was looking at 18 to 24 months okay got it so if you had a raise three and your last round was eight million you're raising for eighteen months that puts burn somewhere around four hundred thousand dollars per month something like that ballpark yes yeah and most that's head count what 21 mo no most of that is head count the expenses oh most of that most of that is head count correct yeah as i said you don't have any weird kind of hardware on-prem stuff that is a big cost factor to you no 4ji does not have any weird hardware we live in the cloud and our customers connect to us by the cloud it's a fun place to live and margin's much better right it's a great great margin business i love it all right and what are you targeting so jim over the past 12 months what have you grown the company at what are you targeting for the next 12 months uh can you reframe the question sure percentage percentage-wise you talk what are you targeting in terms of growth rate ar growth rate year over year oh so the ar average recurring revenue growth rate for us year over year we're trying to 10x what we did the year before okay and historically over the past 12 months would you do well again we don't move into the financial numbers did you hit the 10x did you hit the 10x target yes we did but it's easy when you're it's easy when you're in the beginning the bending stage yeah yeah i know i mean obviously going from a dollar to 10 is easy going from 10 million to 100 is harder yeah much harder yeah when do you get to the point so i think founders and you can agree feel like feel free to disagree with me on this um i think most founders when they're building companies you know they get the most leverage in terms of going to the next fundraising round or any liquidity event when they get their funding to a ratio back to one to one so for you that would be getting ar backup equal to essentially 11 million what you've raised do you agree with that statement and if so how does that uh you know trigger or plan your next fundraising event uh i don't think i agree with the statement i'd have to reflect on it more um so i i can't answer the question that you're asking well impulsively why do you disagree understanding obviously this is a snap judgment yeah it's a it's a function of of trajectory it's a function of what the overall market size is you're addressing it it's not just about the revenue components it's a measure of the competitive landscape i think there i think it's a more complex nuance uh question than uh what the way you framed it very good all right um by the way it's a 15-minute show so i have to from short and sweet to the point that's that's that's your job is to react right all right very good um how many customers are serving today uh we don't give that information out okay it sounds like it's a very small though number of people right you're talking like five not five thousand it's not five thousand by any stretch we are dealing with very large financial organizations so it is it's a smaller number for sure but yeah yeah it's a good number yeah yeah um the the reason i ask is because i want to ask if you're 21 people on your site on your team how many of them are focused on sales or some sales function three okay how do you model the pro forma right there their ote target relative to their base comp is there some 7x or 10x multiple you like to see or how did you model that well given our stage frankly it's still too early for us to actually have the hard metrics by the way that's why i'm asking that's actually the hardest thing to model or is your first one but everyone has to model the first one at some point you have a lot of experience so what was your first step how did you think about it well the short answer we are still thinking about it we are still modeling that today i totally get that jim everyone has to start those somewhere how did you start where did you start out where did we start we well the place we start is looking at actually what the cost structure of of serving the customer is uh that's what uh where we start and we look at what our processing costs are associated with that and try to understand what the curve could be uh that that can support that that's where we start we start on the cost basis what does that mean curve that can support that the you're going to have a specific gross margin target that you're trying to drive towards uh and that gross margin allows you to start back into backing you know what your cost structure is you know what the gross market target is market target is margin target is and from there you can then start to understand what you think your pricing model that you want to be and then you can start to experiment can your your model support the marketplace support the model you have yeah i mean the second you know going deeper on that is like are the number of leads coming in where you can actually support three sales people do you have sdrs per each salesperson and then again yeah well the the reason we have sales people is because we can support it uh i'm a big believer in ensuring that uh the the sales cycle and the sales funnel uh is is aligned uh we don't want to have uh empty empty capacity there yeah but jim that is you obviously you always want to work towards equilibrium and that metric you just gave but you're never actually at equilibrium you either have more leads than you can handle or you have sales people that are not at full quota if you meet perfect equilibrium at all times you'd be a financial genius yep no and i'm not a financial genius uh so right now we still have room to grow uh like i think or startup organizations do but as i said it's a little too early to actually i think be hard on those metrics that's why i'm pressing back on you a little bit and say yeah i can't give you the hard metric that you look at no it's fine but but i'm saying you didn't just hire a sales person you had to take a stab at modeling at some point so i think it's a totally fair question for me to ask based off your experience what you targeted on your first thing for all my other listeners who have to go out make their first sales higher it gives them an idea of how they might think about it yeah the uh if you're going to look at an enterprise to sell uh my experience has been that person should be able to generate at least in within a year uh at a run rate basis 5x what you're actually paying them okay very good at full ote yeah so just be clear if you're paying full base plus they meet 100 of their commission structure let's say it's 200 000 for the year you're saying their on target earnings should be something like a million dollars a new ar hit you know new quote of that that year that's exactly right yeah interesting did you see that work very well at any of the other past companies that's where you got the 5x number from uh the the short answer is do i have seen it work yes there's variation a little bit but that's a good number for that type of ticket item that we're talking about obviously it's a function of the ticket item where do you believe i mean what is it a is it a stretch goal to say maybe not obviously by the end of this year but the end of next year that you break a 10 million run rate or do you need more time than that you think to hit that uh again we don't talk about our our financial metrics out outside this business uh i think it's too early to tell it's simply too early to tell yeah oh by the way i i know you're doing less than 10 million bucks based off some information that i have i'm just curious how aggressive you're planning right so 10x year over year growth you could hit that you know next year or maybe you need more time you don't know yeah that's why i said it's too early to tell it's like do you have a general idea as you work towards that will the velocity come from going deeper in the fintech space or adding on new kind of niche sectors you're focused on outside of just fintech in terms of sector focus we believe the fintech world for us is just huge and we're going to spend a lot of time there before we have to go sideways okay so i'm going to force you in an unfair question here but play along if you only have 10 fintech customers paying you a million dollars per year you feel like you can build a billion dollar business on that by focus on tripling what they're paying you every year versus going out and getting a thousand new customers from a different cohort we believe in our current customers and the customers we're targeting this dramatic growth that happens horizontally inside those customers and strategy very good all right let's wrap up with the famous actually sorry one last question how aggressive are you being on cac are you comfortable with the 24 month payback or you optimize for 12 or less uh it's sort of right in between okay between 12 and 24 fair enough all right let's wrap up with the famous five number one what's your favorite business book uh it's actually it's an old book called the loyalty effect number two is there a ceo you're following or studying uh one of my mentors uh back to network plus there's a gentleman named robert hell uh he's one of the best business leaders i've ever come across my life h-e-l-l-h-a-l-e okay h i was gonna say i'm glad i asked because it's a hell of a last name no pun intended all right yes it is number three what's your favorite online tool for building your company oh my favorite online tool uh that that's a great question um in terms of that what we use what you use the most yeah we use slack a lot internally fair enough number four how many hours of sleep to get every night forge okay and uh what's your situation married single kids married and three kids how the hell you only sleep four hours and you have enough energy to put up with a company and four kids uh and uh on the weekends i do sleep more than four hours okay fair enough and how old are you what i'm uh 52. last question what do you wish your 20 year old self knew what do i wish my 20 year old knew oh god uh i wish my 20 year old self uh knew that uh that's a good i i should know the answer to this question um 20 year old self i wish knew that mobile was going to be bigger than it was uh when when it was guys mobile's gonna be big again forge dot ai helping folks transform position specifically fintech and financial customers transform unstructured data into computational fuel these folks can use to make important business decisions these landing customers call it north 100 000 acvs but call it south of a million so again enterprise motion here 21 people three of them obviously are sales people on target earnings relative to again uh kind of quote attainment is essentially a 5x multiple there he's happy to spend anywhere between 12 and 24 months of uh contract value or lifetime to acquire the customer on the front end again burning currently about four hundred thousand dollars per month on eleven thousand dollars uh totally total raise as they look to scale call it 10x year over year as the target launched in 2017. jim thanks for taking us to the top we appreciate the time