SaaS Interviews with CEOs, Startups, Founders
1585 Why This $6M ARR CEO Deploys Physical Data Teams To Each New Customer
26 Nov 2019
Chapter 1: What is the main focus of Faraday and its revenue model?
Founder of Faraday, helping consumer brands, really e-commerce brands, figure out what their customers are going to do next. How can they get more leads? How can they increase cart value and lifetime value? They're having success. Founded in 2012, now working with 60 enterprise brands. Average contract value is caught in the $100K range. You can kind of back into revenue there.
Pushing $6 million in ARR, healthy growth, $7.1 million raised. In terms of CAC, less than 12 months with a team of 25 people up in Vermont. Hello, everyone. My guest today is Andy Ross-Missel. He leads a company called Faraday.io in its mission to deliver practical, powerful AI to consumer brands.
A designer by training and lifelong software engineer, he's responsible for the product strategy, data science organization, recruiting efforts, and corporate matters. Previously, Andy founded the celebrated sustainability startup Brighter Planet and worked in politics. Andy, are you ready to take us to the top? You know, so many smart people are moving out of politics. I can't figure out why.
But here you are building Faraday. What's the company do and what's the revenue model? How do you make money? Yeah, sure. So we help consumer brands basically predict things about what their customers are going to do next. Everything from lead generation and conversion through to who's going to be further engaged as a customer or even down to retention issues.
And we're a SaaS platform, charge monthly, work in 12-month contracts. That's great. And typically, what pricing axes do you price around? Is it GMV, total SKUs, total data sources? What is it? Yeah, so mostly we price around just volume and usage.
So the number of different objectives the client's trying to predict, how much outreach is being done, volume through APIs and other kinds of things like that. Okay, great. And then I don't want to go down every customer cohort, but what would you say on average an annual contract looks like to really use your platform aggressively? It's a good question.
I mean, so we're not a cheap SaaS platform, certainly, but we're always going to come in under the cost of a single data scientist is like the way we like to peg it. Generally speaking, under $150,000 a year. That's why I asked, 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, um, just six years here as a company at Faraday, um, started in Vermont. So taking, you know, a little bit more time than I think a lot of other tech platforms would.
Um, but, um, growth has been really strong over the last couple of years and kind of entered a new, a 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 our first year to a firm here in Vermont called Fresh Tracks Capital and our lead investor is Intercap. Oh, that's great.
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Chapter 2: How does Faraday help consumer brands predict customer behavior?
And then over that time span, 2012 to today, what's the team size look like? How many folks? We've been hiring a lot. We're up to about 25 this week. Oh, that's cool. Congratulations. And everyone based up there in Vermont are spread out? Yeah, we're only here in Vermont except for one or two people who've had to move for family stuff. Okay, that's nice.
Do you still figure out a way to keep them on, though? Oh, definitely. That's good. All right. And what have you scaled to in terms of total customers on the platform? We're right now at about 60 brands. Okay, that's pretty healthy. So this is very much kind of a high-touch model, right? High-touch, high onboarding, get GMV up and drive expansion? Yeah.
Yeah, I mean, yes, you know, I would say that we definitely try to stay away from too much consulting. 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. Optimization on a per client basis. Yeah, no, it makes a lot of sense.
Chapter 3: What is the average contract value for Faraday's services?
And look, I mean, 60 folks that, you know, call it an ACV of 100 grand that puts you around a $6 million 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 within, 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 in ARR or no? No, definitely not. We ski almost every day when we can out here in Vermont. Okay. Nevermind then. 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 of months away. So, all right, fair enough. So 6 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,
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.
People often think they want more customers, but what they really want is more customers that don't return products and spend at least $100 and 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, get 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. So make sure to take time early up front is important. And then I would say also just, 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 the brands change. So when you look at 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 churn directly. that in terms of, um, our, 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, we're, we're well under that now, which is, um, which is healthy. That's fair. So just to translate that, for a $100,000 first year contract, you're spending less than a hundred grand to get that deal? Of course.
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Chapter 4: How has Faraday's growth trajectory been since its founding?
Now Vasile and his team do a great job putting this thing together. whether it's B2B or B2C marketplaces to e-commerce or even mobile apps and hand-on workshops, they cover everything related to growth. And these are very unique growth channels that these top experts, and these are actual operators, these are people doing, people doing it pager duty. at Zoom, at Malwarebytes, at Engageo.
These are people actually executing growth strategies you're gonna learn from. I'm also giving a session that basically pulls data points from the over 2,000 interviews I've done with SaaS CEOs and showcases six of the most unique growth strategies, kind of off the obvious path growth opportunities that CEOs have used to drive their first million and 10 million in revenue.
So I'd love to see you there. And we've negotiated 10 tickets at a discount, a 40% discount. The link to use is nathanlatka.com forward slash growth. That's Nathan Latka, L-A-T-K-A dot com forward slash growth, G-R-O-W-T-H. On that page, it'll automatically take 30% off for the first 10 of you and then use coupon code the top for another 10% off.
Now, if you choose to make sure you're attending, be sure to email me. If you go use the link now and grab it, I'll make sure to step on one-on-one coffee with you. I want to meet you in person and spend some time together. But again, I'll be at the Growth Marketing Conference on December 10th and 11th in the beautiful city of San Francisco at the most beautiful hotel, the Fairmont.
I hope to see you there. NathanLacka.com forward slash growth. You mean in terms of buying sources from ad partners or consumer apps where people upload receipt data or things like that? Yeah. Data sourcing for us, we've got a whole group here focused on that. We do consumer license data, opt-in marketing data. We don't do any social scraping.
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 U.S. consumers and, you know, attach that to our client's 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, what are your strongest mechanisms to basically end up where my second year contract is 150 grand? Yeah. Yeah. So we focus, as I said, on the customer lifecycle. And generally, when a client starts with us, they've got one or two stages that are top priority.
I might be saying for a team really focused on, you know, growing our customer base. And so lead generation would be maybe our initial objective with them. 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, OK, 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, OK, we'd love to do this for you guys. We're already connected all your data. And so we can 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 revenue has been over the past 12 months, but let me ask it a different way.
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Chapter 5: How does Faraday onboard new clients and what is the process like?
No. Nothing, okay, interesting. Number four, how many hours of sleep do you get every night? Eight hours. Yeah, I asked that because I don't want my audience copying a CEO or learning from a CEO that gets like two hours of sleep, you know? That's crazy, don't do it. Yeah, it's crazy. All right, so eight hours of sleep and what's your situation, married, single, kids? Engaged.
Getting married in March. Oh, congrats. That's exciting. So no kids, right? Huh? No kids yet. That's great. And how old are you? 35. 35. Last question. What do you wish your 20 year old self knew? 20 year old self. I wish I could have made a better job of discerning important things from urgent things. Yeah, better at important versus urgent. It's a trap a lot of us get stuck in.
Founder of Faraday, helping consumer brands or the e-commerce brands figure out what their customers are gonna do next. How can they get more leads? How can they increase cart value and lifetime value? They're having success. Founded in 2012, now working with 60 enterprise brands. Average contract value is caught in the 100K range. You can kind of back into revenue there.
Pushing 6 million bucks in ARR, healthy growth, $7.1 million raised in terms of CAC, less than 12 months with our team of 25 people up in Vermont. Andy, thanks for taking us to the top. Thanks a lot.