How Stratifyd CEO Derek Wang grew Stratifyd to $3.6M revenue and 50 customers in 2023.

hello everyone my guest today is Derek way he's an accomplished published and recognized academic leader in data analytics and a business of visionary he spearheaded techniques to analyze structured and unstructured data from resources around the web in order to create predictive algorithms for companies across the globe this knowledge became the foundation for his current company stratified Derek are you ready to take us to the top all right thank you all right yeah tell us what stratified does and how you make money what's your revenue model so we're into an custom analytic platform for fortune 1,500 enterprises so our primary focus is not adding just a thin layer and what company does a south layer on top of it but really rethink how in AI era a contra mentholated can be powered by machine learning and AI algorithms so we provide a full platform for organizations to improve their customer retention and their customer satisfaction so we are a product driven company right now we're about 30 different fortune 500 customers and there are value as well sorry you said 30 30 yeah yep yep that's great and give me a sense generally of I mean what are these guys like what are they paying for how much are they paying for uh nimona on an average month so we are our initial deals typically about in the mid six figures so this is that subscription but they're paying this for to finding out problems that they have customers throughout their customer interaction data primarily all of the data is where from the textual side their call centers their emails their surveys really getting that omni-channel and the customers 360 coming back from their taxol data letting our AI to learn what are the issues patterns outliers troubles that are seeing there and then specific gating to their business analysts for them to be rapidly identifying this issue and then take action on top of that so did you see the average customers paying $200,000 per year for the platform basic figures yeah okay god but but six figures is a huge range I mean are we talking like 100 or 200 grand or like 800 or 900 grand so we got a big swing theory there's big companies paying us about four or five six hundred thousand dollars a year we've got a typical NGO it's about 150 to 2 that's various about how wily deployment and our land deal was let's for example if it is department level there will be a 150 to 200 if it is a cross function organization level that can go up as high as six six hundred to ten one hundred thousand years totally get that and I just want to save us time by not going on every customer cohort is it fair to say two hundred thousand bucks is a fair average that's a fair average okay tell me more the backstory here when did you launch the company so we launched the company back in 2015 with the future pilot support from Lulu for sure and then this is after I've done a lot of work with three-letter agencies in the states where we're building our tactical analytics using machine learning help organization I was a university professor before started the company and really with my two of my co-founders my postdoc and my PhDs we launched the adopter model in a lot of enterprise to provide this product for the enterprises okay and again so what was the first year in the first year had a customer the first year we had a compliments 2015 it would only shift code in like less than 24 months got it and how do you bootstrapped the company or have you raised so we put Travis for the first six months back in 2014 then we raised about three rounds from 15 to now okay so how much total have you raised today we raised less than 12 million less than 12 yeah okay and and why decide to raise capital or why'd you need it so it's actually it's really a why raise money it's really how speed up the speed when we go to market right we come up with a technology company and that we need to bring sales the marketing and all that requires cause but we have a very high efficiency side so that we can grow the sales team to enter the enterprise side to the money you for us it's a war test because every enterprise sales probably take 90 to 120 days so that's the sale cycle when you do weather through as the in our business model I see what is it what you know talking about sales cycles and specifically the cash component of that what is your payback period today and what are you spending to acquire customers right so it's very interesting in our line of business not like any other stats which is months mine's month over - based on turn-based model we are a new subscription with enterprise so typically we go with enterprise side on an a 30 every year and I start every contact so as soon as our contracts done they prepay for the first year on the necessary terms so we're our cash flow is very strong in terms of our line of business talk to me they own a deferred basis so you take that cash flow I understand you have no cash gap because it's all pulled up front but when you actually recognize that revenue per month how many months of revenue recognition do you need to have a payback equaling you know get you all your money back o get our profit margins in the high 90s really that goes back really quite quickly to what yeah no sorry no I'm not prophet Mars I asked a question in and in a wrong way let me let me try something else what do you spend to acquire customers o our tab grade so our attacker is only half of what we are targeting organization per year per year so you spend about a hundred grand to acquire the customer average do dive yeah yeah okay thorough an average Jill says it's 200 grand yeah yeah okay so payback period there is about six months all on a deferred basis but in terms of a cash recognition basis you're getting it all paid up front so it's instant that's right okay and what's the team size today we're about 35 people in the US everyone's in the Bay City are they all based where you're at today in Charlotte about 32 people are based in Charlotte with headquarters here that we have our Columbus office for the central for sales operation and then we have our Denver office for the West Coast operation okay very good and then talk to me a little bit more about economics obviously churn is critical in a SAS business what is your turn our turn is zero because ours it's not typical fat that's where Enterprise that so every turn here give me a heart attack so we keep we have a good customer success team so that so far with all other customer we have there's the or attorney so over the past three years you know revenues have Canton no customers have cancelled and nobody has downgraded no okay I that's remarkable number one number two I I don't think I've got about 3,000 interviews I've never had anyone with literally zero churn so that brings up two questions one you're telling me no customers even downgrade lost revenue so even if they're still paying you today no one's downgraded because we're it's going with total contract by the way that is committed as we go into our clients no so far no good no and finger crossing so the way we structure our business is it's a to enterprise sales right so they're paying on an annual basis on a subscription and typically we provide enough our lines for our customer we're putting pushing for longer term when we talking to our customer right typically our contract years are two to three years and those are the ones that though they were committed to it too for that three-year period although they're paying year-over-year prepaid fashion those are locked in contracts I see what you're saying okay good that makes sense their ultimate what's happening here is your sales you're locking them in on the initial sale you really haven't had a renewal conversation with most clients because when you sign them they've thirst they've been locked in evil ways and you also even was one year deals that we had earlier those are renewed we don't have any locked out the one year and they are renewed at higher price points not all at a higher price point we one third of our customers we have upsell typically one-day renew at a standard that just renew on what they have already okay and what happens to okay so one third your upselling the other two-thirds just stay at the same price yeah or if not not approaching their first renewal period so it's all contente cohort one third of them is upsell and then there are upsell includes the amount of any subscription as well as the duration of the contract right so we're starting on both ends for enterprise but then the two sort of that is inside or renew that the existing contracts right okay but there's no one that says okay I paid to integrate in the first year we love the platform but it's a little too much you want to go now and do a hundred grand for the next year nobody's done that don't okay that's great and look I can kind of back into revenue right 30 30 folks right paying you had an average contract right if 200 grand puts you at about 500 grand a month in revenue or about six million a year is that accurate not entirely accurate so the 200 we does a this year so to hundreds where we are now when we're earlier were smaller deal size about twenty thirty forty we also have that deal is coming along so you're signing up today are sending up a 200 gram but that's not an average across your current customer but it's not it's not average yeah go ahead okay so talk to me about what you're at today what was revenue last month so revenue lost minds were about to eighty three hundred that's I'm still healthy and where were you at...