How Stitched Insights Is Signing Annual Enterprise Contracts at $10,000 Per Month Per Channel (Interview with CEO Dmitriy Pavlov)

Introduction and What Customers Pay For

Nathan Latka

00:00Hey, folks. My guest today is Dmitriy Pavlov. He's the Founder and CEO of Stitched Insights, a Silicon Valley deep learning pioneer in predictive and consumer insights. He's a guest speaker on emerging tech trends, cross functional team building, and science in marketing. Dmitriy, you ready to take us to the top?

Dmitriy Pavlov

00:13>> Been ready for a while. Let's go.

Nathan Latka

00:15Nice. So, hey, last time we spoke, man, was back sort of middle of COVID. Give everyone a quick reminder. What are customers paying you for?

Dmitriy Pavlov

00:22>> Yeah. For sure. So we're creating ideal experiences for consumer brands and helping them understand how their customers think and feel against their competitors in their entire category. And so we're charging at a base $10,000 a month per channel. Things like Amazon is a channel or an internal support request channel or Twitter is another channel. And so we've been working with predictive innovation teams, sustainability teams across luxury groups, fashion retailers, leading consumer electronics companies, and essentially understanding,

00:53>> working with their predictive innovation teams and sustainability teams and e commerce teams, helping them really measure at a really granular level what their customers care about at the attribute level of each product versus their competitors. So they can actually start measuring what is the size of the opportunity in the entire market for their products, for their consumer segments. Basically, is there a consumer segment that's really, really happy with a dimension of a product outperforming, or is

01:20>> there a consumer segment that really hates a specific dimension of a product their competitor has that maybe you have a really huge opportunity to hit on.

Nathan Latka

01:27$10,000 per month per channel is significantly different than, I think, we last spoke, you had, I think, nine customers paying on average sort of a grand a month. So have you really moved up market intentionally?

Shift from POC Revenue to True ARR

Dmitriy Pavlov

01:35>> Oh, yeah. We've completely shifted sort of the entire go to market strategy. What we've realized is basically and before, it was really like MRR and really early POC revenue that we had. Now we have actual ARR revenue. We're actually nearing a little over a million ARR this coming year. And so

Nathan Latka

01:55What does that mean? You mean like you take today this month's revenue times 12?

Dmitriy Pavlov

01:59>> No. We we actually have some some new engagements coming in. So we have a little less than 10 customers at this point. Basically, we have now engagements that are annual contracts as opposed to, just a month by month or a POC, just non recurring revenue contracts. And so we've switched gears completely and and kind of how we're we're monetizing this a little bit.

Nathan Latka

02:20Well, so help me understand. So you use in 2020, you said you had nine customers. So you still have nine customers to say, but there are different customers and paying you way more. Is that right?

Dmitriy Pavlov

02:27>> We were running POCs in 2020 with a number of folks like Sephora's of the world, trying to understand basically what we are deploying and what we are solving for them. And what we realized is really where the real pain point is across all of these brands is they're running surveys on all of their customers. But what they're not doing is they're not serving all of their competitors'customers at that same scale. So when they make product

02:51>> changes or estimate market opportunity, they're really only estimating in a bubble, in a vacuum. They're estimating what they're doing. What we realized is by actually looking at the external data, we can actually measure the size of the opportunities for these brands. And what we found is who specifically is using these insights. So what we were initially doing is just exploring with

Nathan Latka

03:13Got it. So so a year ago, those nine were not customers. They were they were pilots. And so now today, you have nine fully onboarded paying customers, and it's true ARR.

Current Customer Count and Annual Contracts

Dmitriy Pavlov

03:22>> We have live under 10. We'll have over 10 fully true ARR customers by early this coming year. Yeah. We have number customers now for for annual agreements.

Nathan Latka

03:31I see. I see. I see. So so what when you just look at booked revenue today, what would you say MRR is?

Dmitriy Pavlov

03:38>> We're we're sharing ARR essentially. So we're we're gearing up for a series a this coming year, at the in the new year. So we're basically our our target is a little over, 1,300,000 in ARR is is basically from from our existing contracts and their expansion revenue that's coming in from those contracts. Yeah.

Nathan Latka

03:54When do you wanna hit 1.3 a year in, like, an ARR?

Dmitriy Pavlov

03:57>> Yes. Correct. And and When realize No.

Nathan Latka

03:59No. When when do you wanna hit that? When?

Dmitriy Pavlov

04:00>> Oh, probably before q two of this coming year.

Nathan Latka

04:03The new year. So that so 1.3 in ARR calculated by, you know, that month's revenue times 12 forward looking when we needed about a 110,000 a month in revenue to get 1.3 in ARR. So you think by q one of next year, before your series a, you'll break a $110,000 a month in revenue?

Dmitriy Pavlov

04:18>> Oh, for sure. For sure.

Nathan Latka

04:19Yeah. And where are you today?

Dmitriy Pavlov

04:21>> And and so we're we're on our way to that today. We're we're we're not there yet, but we have really, really large contracts coming in right now. And what we've realized is there's expansion revenue with our software, especially where we are sharing these insights with one team, like the predictive innovation team. Yeah, to be clear, I

Nathan Latka

04:39totally get all that. Like, I understand the upside. I'm just trying to get a sense of how much you have to grow between now and your series a to hit that mark. So so are you not sharing on purpose sort of revenue today? Or or if not, like, where are you? What's the range?

Dmitriy Pavlov

04:50>> Yeah. So we're we're actually right in the middle of of a fund raise right now of a of a small, like, c plus round. So we're not Okay. Sharing externally those numbers, but it's it's it's well on the way to it.

The Revenue Question: Under $700K ARR

Nathan Latka

05:03Got it. So, I mean, can we so let's put a big range on it. Can we say you're above $50,000 a month in revenue right now?

Dmitriy Pavlov

05:09>> I could do rate well, I could tell you that we're under, we're under 700,000 ARR still.

Nathan Latka

05:15And and you're calculating ARR, we're taking last month's revenue times 12. Right?

Dmitriy Pavlov

05:19>> Annual recurring. Yeah. It's it's anything that's signed, contracted for recurring revenue moving forward from 2020 or 2021 on.

Prior Funding Round and Commercialization

Nathan Latka

05:29Got it. Still a little confusing, but we'll move on so we can learn other stuff. Got it. So so signing enterprise accounts, you mentioned seed plus. Does that mean you already raised a seed? Did you raise a seed earlier?

Dmitriy Pavlov

05:39>> So there's not really a name for this round. Yeah. We raised a small chunk, the previous year. We raised a little over a $100,000 basically just to help us commercialize some of this platform. And we've used that essentially to to figure out what is this platform that we can start expanding out.

Nathan Latka

05:55And And that was in 2018 you raised the pre seed?

Dmitriy Pavlov

05:59>> That was about a year and a half ago. I'm I'm getting lost in what year we're in now, honestly.

Nathan Latka

06:03Okay. So 01/10 and sort of, like, early round, and you're closing sort of a seed plus right now. How much are you looking to raise right now?

Dmitriy Pavlov

06:09>> About 3,000,000 is what we're looking at. And we already have some really, really great investors that we're working with right now in middle middle of the conversation with or so.

Nathan Latka

06:19Why do you need to raise right now? Like what what what why do you have to, you know, have that kind of money to grow?

Enterprise Sales Pipeline and Fundraise Rationale

Dmitriy Pavlov

06:23>> Yeah. So I've actually this past year, I've just switched gears from anything other than sales. And I've had the opportunity to speak with dozens and dozens of CDOs, CTOs, CSOs, CMOs, CEOs across these Fortune 100 brands. And I've literally spoken with 30 or 40 Fortune 100 c level executives. And what I found is that we can actually, we can launch this pretty easily because we are offering something really different than what's in the market. We're not

06:52>> looking at sentiment. We're not looking at overall what's happening for your overall brand. We're understanding each individual dimension, what matters. And I've been able to get a, and we have a new subscription process that we go through. It's an annual agreement that has a three day trial that's attached to an annual agreement already. And so because of all these conversations and this easy piloting process, I've actually created a pipeline of way too many active engagements basically

07:19>> that I'm realizing we can hit all these if we have additional revenue, if we have additional funding.

Nathan Latka

07:24Why why can't you just go

07:26close them now and you get them to pay upfront and use that money to drive growth?

Dmitriy Pavlov

07:29>> So we we will potentially do that starting starting next year is is to leverage the money upfront. The easiest way has been to say, give you like for $10,000 we'll give you a snapshot analysis of one of your products against a competitive category set. And then at the end of that month, it turns on into a $10,000 a month subscription. And then we start expanding to additional channels. So that process to get to get paid, like,

07:55>> large amounts from these brands is is a longer process. So right now, we're still we're not getting enough revenue in to catch essentially all the opportunities that are coming in. So we're trying to accelerate this.

Nathan Latka

08:06On the 3,000,000 now, what valuation are you targeting?

Dmitriy Pavlov

08:09>> Yeah. So that's also we're not sharing that exactly. We raised under $4,000,000 valuation previously, and we're up up ahead of that now basically. How

Nathan Latka

08:19much I guess, what's a range of how much percent of the company do you think you'll have to sell to raise 3,000,000? Are talking like 10 to 20, the standard stuff? 10 to 20%?

Dmitriy Pavlov

08:25>> Probably less than that. We're we're so one of the one of the investors is with the SPV, and they're actually, like, a very, very, very friendly terms so far.

Nathan Latka

08:36Not you're looking at debt? You're looking at debt or equity?

Dmitriy Pavlov

08:39>> Safe. We're looking at a safe.

Nathan Latka

08:41Okay. S you said that the one of the partners is at SPV?

Dmitriy Pavlov

08:44>> SVB, like a special purpose vehicle that

Nathan Latka

08:46Oh, SPV. I thought you said Silicon Valley Bank. Got it. Okay. So so got it. So you're raising 3,000,000 at greater than a 30,000,000 valuation, so you can sell less than 10% of the business. That would be a great deal for you. That's what you're targeting?

Dmitriy Pavlov

08:58>> Yes. Basically. Mhmm.

Nathan Latka

09:01And I guess why if you're planning to go raise a big round, like, when you hit the 1.3 ARR mark in q one, like, why spend a bunch of time right now trying to raise 3,000,000?

Dmitriy Pavlov

09:10>> Well, actually, we got preemptively reached out to by by a number of investors. I I was not going out and raising right now. I thought, actually, let's just focus on these contracts, get them to expanded revenue between each contract, and then next year, go out and raise a larger round. But the advice has been we can bring on additional folks. I can bring on sales support. I'm doing sales myself right now. Like, can bring on an

09:31>> SDR.

Team Size and Hiring Plans

Nathan Latka

09:32How many are on the team right now?

Dmitriy Pavlov

09:34>> It's essentially my well, we have we have folks that are part time and full time. We essentially have the same team that we started with still, and it's just not Dmitriy,

09:42>> don't know how how many is that?

Nathan Latka

09:43How many full time?

Dmitriy Pavlov

09:43>> We have

09:44>> we have nine people still, basically the same participating folks that were part time and full time. And what we started doing is bringing on some of those folks full time, but that's still not enough capacity.

Nathan Latka

09:54How many right now are full time?

Dmitriy Pavlov

09:56>> Full time? We have literally about three full time right now. And by the end of November, we'll likely have probably six or seven full time.

Nathan Latka

10:06So I guess what happened because, like, back in April I mean, obviously COVID hit, but, like, in April last year, you told me you had six full time employees. Did you let three people go?

Dmitriy Pavlov

10:12>> No. We we just we built out the platform. What we were building is data pipelines, and we were engineering these these flows. And now these systems work relatively hands off. So the pilots and the subscriptions that we're launching are through channels that we're already we already have full analysis of. So we're just deploying our platform right now. So there's zero development happening, basically, at this point.

Nathan Latka

10:33So you let three engineers go, basically?

Dmitriy Pavlov

10:35>> They're they're actually so one of my one of my head data scientists just started his own company also, and he's just part time helping us now, basically. But my yeah. My take is up until we need development time, like, don't need to develop anything else new up until after November, basically. And we're deploying just with with our existing platform. So So we're focusing on sales 100%, and so I need salespeople and I need support folks.

Dilution and the Co-Founding Team

Nathan Latka

10:59Got it, interesting. How do you manage dilution? Mean, this is a lot of capital in an early stage. You don't want to blink and only own 20% of the business.

Dmitriy Pavlov

11:08>> No, for sure. I mean, honestly, dilution is important, and I don't want to dilute myself too much. But if the value that the investors, etcetera, bring in is more than what we're giving up, I'm happy with that.

Nathan Latka

11:23Do you have co founders?

Dmitriy Pavlov

11:25>> I have a co founding team. I was the original founder. By the time I realized what this market can look like, and by the time we became a portfolio company of One Valley, previously GSV, that's when I realized, oh, we actually have a much larger technology play. And that's when I brought on board Doctor. Johannes Eichstadt, Doctor. Andrew Schwartz. And since, by the way, I think I've mentioned that Johannes is now at Stanford's Human Artificial Intelligence

11:48>> Lab at the tip of the spear for linguistic and AI research. That's actually been really, really useful for us to really deal with these CTOs and CDOs because they're really actually excited about these.

Nathan Latka

11:57You pay him a bunch of money?

Dmitriy Pavlov

11:59>> Johannes, he got paid a ton of money to help develop these systems. He's now he's now basically

Nathan Latka

12:05From you? You you paid him that?

Founding Team Investment and Co-Founder Sweat Equity

Dmitriy Pavlov

12:07>> We actually we actually were the founding so we put in money ourselves. We put in about a 250,000 from the founding team to develop these things.

Nathan Latka

12:15And a bunch of that went to this doctor that's teaching at Stanford.

Dmitriy Pavlov

12:18>> Johannes was was also one of the folks that with the founding team that put money in originally. He himself did not take a salary for the first like year and a half. And they actually had like a 3,500,000 non dilutive government grant to help develop this technology. So we took that open source tech that Johannes and Andy created and created a proprietary version, commercial application, and they basically put in all of their sweat equity and additional

12:43>> money in there.

Nathan Latka

12:44So how many how many founders are there then? Three?

Dmitriy Pavlov

12:47>> So myself and two two co founding teams.

Nathan Latka

12:50Did you split a third, a third, a third or no?

Dmitriy Pavlov

12:52>> No, no, no. Well, came in once we already had a product.

12:58>> They're adding to this is technology that really separates us from anything else.

Nathan Latka

13:03Got it. So you still own the majority of the business, more than 50%?

Dmitriy Pavlov

13:06>> For sure.

Nathan Latka

13:07See. I see. Okay. Cool. Very cool. What else? Anything I'm missing before we wrap up?

Market Opportunity and Customer Intelligence Vision

Dmitriy Pavlov

13:12>> Yeah. So what I found is honestly that there's a lot of really interesting shifts going on right now, in the industry. And I'm really excited about that it's being recognized by these brands. So all these brands have been talking about, we really care about customers. We really want to focus on what customers care about. But what I found is that really none of them have the resources or tools to look at all of their customer feedback.

13:35>> They actually don't know what all of their customers care about. And on top of that, they have no idea what their competitors'customers care about. They're not looking at any of that. And I think that's such a huge missed opportunity for folks to, not just for the brands, but for customers, to have companies really listen to them and start fixing stuff. And so that's where we're kind of trying to wedge ourselves in is to really help

13:56>> these brands understand what are the things, what are all the things that are top of mind, really the most important things to your customers to drive loyalty and adoption and to drive sustainability. And we're working with these luxury brands. They're building multi year, multi billion dollar strategies to we have sustainability initiatives. We want to fix animal welfare and carbon emissions. But they don't know what about animal welfare, what about carbon emissions is important. Do their customers

14:20>> want more sustainable leather wristwatches for the animal welfare? Do they want plastics that are more sustainable? They don't actually know. They're just moving on all these things. And where we're coming in is we're actually measuring across all their Maisons, across all their brands, what are those things that matter to your customers the most? What will move the needle to your customers on sustainability? And then after you launch these initiatives, what of those things have impacted you

14:41>> positively? Have you increased sales because of these changes? And have you increased over the category? Or has the category itself shifted and you just moved to the category? These brands are blind in this space right now. They think they're performing well or underperforming and they're not really taking into account the whole thing. And so we now finally have tools to look at all this massive data. And I'm just really excited that now it's actually getting recognized

15:03>> by these brands. And I don't know if it's a shift of COVID or just AI is becoming more understood in general, but it's it's such a great trend. I'm really excited about it.

Famous Five Rapid Fire

Nathan Latka

15:13We'll see what you move, what moves you make next. In the meantime, let's wrap up with the famous five. Number one, favorite business book.

Dmitriy Pavlov

15:19>> Favorite business book. Oh, man. You know, kill Ganesh. It's an interesting book.

Nathan Latka

15:24Number two, is there a CEO you're following or studying?

Dmitriy Pavlov

15:28>> Yeah. Since I read Bob Iger's book right of a lifetime, I think, I've been following him closely. He's been really interesting. Yeah.

Nathan Latka

15:35Number, three, what's your favorite online tool for building your business?

Dmitriy Pavlov

15:38>> Honestly, like, Google Slides have been really awesome.

Nathan Latka

15:42Number four. How many hours of sleep do

Dmitriy Pavlov

15:44>> you get every night? At least seven and a half. Once in a while, I get, like, three hours just if I'm up all night, but then I'll I'll sleep in later.

Nathan Latka

15:51And what's your situation to meet you? Are married, single kids?

Dmitriy Pavlov

15:54>> No kids. Not married.

Nathan Latka

15:57And how old are you?

Dmitriy Pavlov

15:59>> I'm I'm 34, I think.

Nathan Latka

16:01Four. Last question. How many we wish you knew when you were 20?

Dmitriy Pavlov

16:04>> Oh, man. When I was 20, to learn how to prioritize things correctly and to prioritize experiences and things that shift your perspective more because that's really how you grow. So I that new experience, like traveling, like reading new authors, like mentors, like those things really that shift your perspective is is kind of that that the most important thing to really prioritize, I think.

Nathan Latka

16:26Guys, stitched insights founded in 2018, finally helping large luxury brands understand what their customers really want, customer feedback. They have nine paying customers today, call it $5 to $6 thousand dollars a month in terms of ARPU. So flirting with call it $40 to $50 thousand dollars a month, hoping to break the $1,300,000 AR mark by Q1 twenty two, so they're to do another raise. They're currently raising, call it $3,000,000 We'll see what happens there. Raised $110,000 back last year in

16:48the middle of pandemic at a 4,000,000 valuation. Team of three building this bad boy out. He's looking to hire sales folks. Reach out if you're interested. Dmitriy, thanks for taking us to the top.

Dmitriy Pavlov

16:56>> He's awesome. Thanks, Nathan.

Nathan Latka

16:59One more thing before you go. We have a brand new show every Thursday at 1PM Central. It's called Shark Tank for SaaS. We call it deal or bust. One founder comes on, three hungry buyers, they try and do a deal live and the founder shares back end dashboards, their expenses, their revenue, ARPU, CAC, LTV, you name it, they share it and the buyers try and make a deal alive. It is fun to watch every Thursday one

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