Stratifyd Revenue & Funding (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 about a year ago talking about birth rate ooh our culture is about 350 to 400 percent as you can imagine right okay their enterprises round table and we're expecting a large much larger growth rate in the next quarter or so as our economics go polish down to how many enterprise can we attack and acquire in the quarter period right so we only have four to fifteen hundred that we're looking at it the faster we can get new menu logos per quarter the better our and the healthy our presence will be so just to be clear in June of 2017 which is about a year ago you're doing about seventy thousand a month you're now doing three times that call you know two hundred eighty today if not more than it felt more than that percentage yeah between two hundred and eighty and three hundred yeah got it and then walk me through what your net dollar retention is annually it's that we already know it's above a hundred because you said you don't have any churn how far above a hundred is it 154 percent as of so Ambridge on 54 and I think our last quarter is about a hundred seventy two one hundred seventy three percent yes no churn what s there with no churn what that means is you're taking a hundred thousand dollar contract and you're turning into the second second years one hundred fifty four thousand on average right so it's a fifty four percent one hundred fifty one percent net dollar retention yeah okay that's great healthy growth where do you take the company from here how do you get to a million a month so really it's looking at our pipelines and really sharpen our messaging to our focus market doctor right so we are looking at additional four to five percent times growth in the next fiscal year as we're talking there and increasing the land deal like I said every to 200k per customer and then accelerate the number of new logos that we get every quarter so think about that our economic is if we're looking at fortune 1200 customers be our potential as a maximum market cap and the weekend and average get one-third of that 1200 that's 400 customers that we can getting and then at 200 pop that's eighty million dollar AR that's what we're shooting for yep that makes a lot of sense what are you kind of good if you look at just the M are you added last month alone how much monthly Romero did last month oh my monthly recurring revenue did you add last month that's what we're talking about close to 300,000 yeah well that doesn't makes it you mean 300,000 and air are no no no 300,000 mr sorry my question was how much did you add last month oh how much I'm sorry I'm sorry yeah yeah last quarter we're almost out of 80 to 90,000 yes eighty to ninety thousand in NMR yes that's that's great growth Derek good stuff let's let's wrap up here with the famous five number one what's your favorite business book it's the choc Walsh winning winning number - is there a CEO you're falling or studying right now the CEO prom for me is Jeff bezel I really love Jeff number three is there a favorite online tool you have for building your business uh JavaScript number four how many hours of sleep to get every night fired that's good which situation married single kids okay how many one one kiddo n sorry you married or single I married okay and then how old are you 34 34 I Derek last question what he was your 20 year old self new look harder work never give opportunity guys there yeah but work harder never give up opportunity he came out of academia and said he know what I want to make some money now I don't want to be a broke professor I don't to get rich so I'm 20 and 2014 he lunched stratified with his buddies and now I've got 35 people between Charlotte North Carolina Ohio and Denver they're serving 30 enterprise customers doing about 300 grand per month today in revenue that's up about 3x from a year ago so 300 EUR your growth each customer paying call it 10 grand per month they'll call 120 grand per year that's on average across their whole base new customers today are signing up and an average of about 200 grand so they're going up stream which is great 154 percent net dollar retention annually again also a healthy number willing to spend up to six months of first year a CV on cax about a hundred thousand bucks in kak Derrick thank you so much for taking us to the top Thank You Nathan