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Josh Schachter:
Welcome to this week’s episode of Unchurned. I’m Josh Schachter, your cohost with my other cohost this week, John Johnson. John is raising his glass to you right now as and and sipping his, hot Coke. Coffee, half whiskey. Awesome. Wow. Nice. Nice. And we have miss Falterusso. Christie is away at CS 100 in Utah this week, so we wish her the best. We I’ve never been, and it’s always been on my list to go to.

Josh Schachter:
And I just, you know, haven’t gone there, but I hope she has a great time and a successful event. And so we’re very excited. John, I’m not even letting you go in here. I’m just going straight to our guest because I wanna hear he’s got a lot of great things that he’s gonna tell us.

Daniel Silverstein:
He’s still digesting his whiskey anyways.

Josh Schachter:
Yeah. Exactly. Yeah. Exactly. It’s still running its course. So mister Daniel Silverstein. Daniel, thank you so much for being on the show. Daniel

Jon Johnson:
Good to be here.

Josh Schachter:
Is the VP of customer success at Carta, and I think we all know Carta. And he runs post sales. He’s got an organization of 200 folks globally across 6 offices. Lots of stuff to talk about with Daniel. And, yeah, Daniel, maybe maybe if for those that don’t know, I mean, everybody knows. Tell us a little bit about Carta Sure. And, you know, the the product and the company.

Daniel Silverstein:
Sure. Yeah. So Carta has been around for over 10 years now. Most people probably know Carta as the cap table management company, both from the business side and then from the shareholder side. So TLDR, what Carta does, for those who don’t know, we are sort of your source of truth for, equity ownership. On the company level, we can you can manage your cap table and, dilution and understanding of who owns what. And on the shareholder side, you can understand what you own and how to exercise and what the implications of your ownership are. So we’ve long believed, that our mission is to create more owners.

Daniel Silverstein:
We believe that equity, as part of compensation is is a huge huge misunderstood thing in the world, and our responsibility is to to share transparently with our with shareholders and allow companies, to administer with ease and through our software, and be compliant along the way. We’re now building lots of stuff for the future, and I’m sure you’ll hear more about Carta in the future around, some of our private equity and fund administration businesses that goes selling directly into venture capital and private equity funds. The foundation of our company is shifting to a more holistic network convergent product. But the part that most of the audience probably knows Carta for because you’ve had stock held in a portfolio or have been a company administrator or both, is our cap table management software.

Josh Schachter:
Yeah. Yeah. It’s such a John, it’s such a great business, Carta, because, you know, it’s it’s like like the SOC 2 compliance software that I use, right, and Carta. It’s like there’s no alter I have to use something. I guess you don’t have to use Carta. Right? But, like, you know, you could you could go to your paper process, but who’s going paper process on what they do? So it’s one of those products where, like, the product is really good, and I truly mean that, but it could still suck and you’d still purchase it because it’s just a it’s a need to have. It’s a must have. Right? So I I love that piece.

Josh Schachter:
And then once you have that must have stickiness factor Mhmm. The world is your oyster.

Daniel Silverstein:
Our is very strong market fit for sure.

Josh Schachter:
Yeah. Yeah. 100%.

Jon Johnson:
But if somebody who’s been in, you know, investment led companies for, you know, most of us over 10 to 15, 20 years, Josh, 40 because he’s a grandpa. Yeah. It’s this idea of, like, from a standpoint of, like, you you hear about all the sexy stuff, like all the intelligence and, like, the social media, and that’s where, like, a bunch of the big splashes come from. But the stuff that’s kind of the foundational stuff is the stuff that’s the most interesting. Mhmm. And not just, like, how we how, like, we build seamless interactions, but, like, most of us have I have so many shares from, like, 5 different companies that are kinda spread out. And the simple fact that I can go into your tool and take a look at where things are at and what I can and cannot do Mhmm. Makes me a little bit more comfortable as I’m kind of in this market, these days.

Jon Johnson:
So

Daniel Silverstein:
It would be cool

Josh Schachter:
it would be cool if Carta, like, knows more about your wealth than you do. Because it, like, knows the the equity you have and all the companies you’ve worked at and how those companies are doing and whether that’s actually gonna become worth something or not. And then they can just, like, go into adjacent categories, like real estate or whatever. Yeah. I don’t know. Just to Yeah.

Daniel Silverstein:
I mean, there’s yeah. The we have we in the last, like, few years, maybe not right hitting the nail right on that head, but, certainly, we we have released an equity advisory product and service that is answers some of that. If you are a portfolio holder across multiple different portfolios and you work for a company today and that company purchases equity adviser, you can get 1 on 1 sessions with the tax adviser on a lot of stuff like early exercise. If we’re if we’re company was running a a secondary or a liquidity offering and you want to understand how to think about that as a holder, and what you should exercise and not, like, at least from a tax implication perspective. We have branched out into that. I would tell you, Josh, to your point, you know, one of the unique things about Carta, and this was true in early 2019 when I started there, and I think it’s still true today. There’s a very plain language English explanation of what equity is and does not, in our offer letters to employees to make sure people clearly understand what this is and isn’t. And, you know, 30, 40 years ago, the concept of issuing option grants as part of compensation was nonexistent.

Daniel Silverstein:
Now it’s in Silicon Valley and expectation.

Jon Johnson:
Everything. Yeah.

Daniel Silverstein:
But the transparency around what it means and what it doesn’t mean, what you should think about for equity, and what you shouldn’t think about in terms of equity. And, that’s part of what we’re here to do is to make sure people do understand that and understand what they should expect. We can we predict who’s gonna make it? Maybe, maybe not. You know, unfortunately, this should not be super controversial, but a very large majority of companies, startups do not make it. So thinking about equity as a driver for ownership and understanding how to think about that as an employee is important, but, doesn’t necessarily mean everybody’s gonna make a boatload of cash off of their equity grants.

Josh Schachter:
I never thought about that, though. Like, there’s a whole customer education piece, like, end user education piece, but you’re not focused on that. I wouldn’t focus that on that if I were you. I’d focus on on, like, who my CFOs are. Right?

Daniel Silverstein:
Yeah. We

Josh Schachter:
We’re the economic buyers for this. But there’s a huge opportunity of educating people out there on options.

Daniel Silverstein:
There’s there there’s a component of that that we do through different parts of our product. A lot of it is, you know, through webinars and broader outreach in terms of more than a one to 1. Yeah. But our support teams take questions from shareholders often. They’re usually, you know, 2 FA resets and things of that nature. But, you know, certainly, that’s a big question. It’s one of the things we use our community platform for to introduce people to other people like them, so they can engage in that way. But, you know, to your point, Josh, still more company admin focused than it is employee.

Josh Schachter:
Makes sense.

Jon Johnson:
We, just real quick, we’ll jump into a couple of things. Before we kinda hit hit the record button, we were talking a lot about, you know, AI and kind of the those future states. I do think we’re gonna spend a good portion of our conversation there. But kinda leading up into that, you’ve got a pretty large team. Mhmm. And you’ve got a pretty sticky product. Like, it’s I would I wouldn’t imagine there’s a whole lot of, competitive landscape out there. Maybe I’m incorrect.

Jon Johnson:
But talk to me a little bit about how you view, retention, what your CSMs are, like, focusing on when it comes to is it education? Is it, you know, relationship building? Like, talk to me a little about just kind of the core components of the customer success process.

Josh Schachter:
Are you are you suggesting that he’s that he’s that he’s got too many people, that he’s got a sticky product, but 200 people under him that they just

Jon Johnson:
That means he even tweets other customers, and I’m, like, really

Josh Schachter:
stoked. The implication, Daniel. Defend yourself here.

Jon Johnson:
Defend it. Yeah. No. No. No. No. What do they do every day? Like no. No.

Jon Johnson:
No. But, really, like, I I’m actually curious, like, how, I see this as, less of, like, a monday.com where people can just, like, once a month, they sign up and they turn off. But, like, there’s a good amount of opportunity to educate. There’s good amount of opportunity to build kind of that grounds groundswell. Talk to me about, like, the core components that you kind of build into your customer success motions.

Daniel Silverstein:
Yeah. So, it may be worth just giving you a little backstory on how we the CSM team got to where we are today because, I shared this with Josh in our pre call. We were brought here to drive revenue. That was the first step. The the first thing was, you know, we we were a series c company, I think, at the time. We had 7 or 8,000 customers. There was a purely reactive private market relationships team of 5 people waiting for the phone to ring, solving problems, maybe solving something but didn’t know how to do it. And I think our CFO was very interested in the concept of can we get more? Like, what if we repeat this motion? How do we get expansion and upsell revenue? So we spent the 1st full year doing that.

Daniel Silverstein:
And what I did in that 1st year was, yes, commit to a quota and hitting the revenue number, but it was also, like, studying the venture backed life cycle and using ourselves as an example, understanding what happens once a month, what happens once a quarter or twice a year, what does compliance mean, what does it mean to different personas across the life cycle. If you’re talking to 2 founders in a garage, that’s not the same thing as talking to a a late stage private company. Even getting access to c suite is a different problem in the car than it is at other SaaS companies. Like, really trying to get into the persona and understanding how to get ahead of moments before they happen. And that was the backbone of what we built that we still use today. And so, you know, we’ve shifted. We upsold for 3 or 4 years. We drove a lot of revenue.

Daniel Silverstein:
Eventually, we we moved into cross sell, introduced an overlay team to do upsell, cross sell, and moved the CSM team more into a retention NDR type of a focus. That’s still you know, we look for optimization consistently on that. I don’t know that it will stay that way forever. But the thing that stayed in the middle of that is this concept of engagement, and maybe education is not another way of saying the same thing. We we have, you know, 30,000 customers on the cap table side of our business, and the CSM team, has not gotten bigger over the years. We’ve had to scale nonlinearly Mhmm. To get to a place where we can understand patterns and segment the custom the install base to still get ahead of moments. So what we do here, and this is not an AI conversation at all, we’re not leveraging AI for any of this stuff today.

Daniel Silverstein:
We are using technology to do it. You know, a lot of the data comes out of our own platform. That same methodology that I mentioned of understanding the life cycle of the business, We use those as our triggers and life cycle moments to stay ahead of. And many of them are not typical SaaS product adoption things. We don’t have a daily use product almost anywhere. SMB customers don’t need to log in very often. Mid market customers use it more. Enterprise uses it significantly more, but it’s not a daily use or daily love to use product.

Josh Schachter:
What what are what are what are those life cycles? Like, so when I’m raising when I’m raising my next round, boom. There’s a life cycle. Right? When I’m getting ready to sell my company, there’s a 4

Daniel Silverstein:
9 a is the big the first one. Yep.

Josh Schachter:
For sure. Really?

Daniel Silverstein:
Yeah. And and not not as a, like, you know, go from seed round, you know, angel investors, safes, things of that nature before you get to actually raising, you know, a price round and needing a 49 a.

Jon Johnson:
4

Daniel Silverstein:
a is the big first life cycle thing. Life cycle moments happen very typically after every fundraising round. But, really, we start to see it after series a and series b where hiring and retaining employees becomes something to be concerned with. We have modeling tools. We have board tools to how to for board governance. We have investor update tools to communicate with your investors. And then as you start getting into that, like, sort of mid market a to c around and the your, number of shares that you’re issuing becomes an audit thing, we have tools for audit. Our ASC 7 18 tool does, you know, stock based compensation reporting that you can use for audit purposes.

Daniel Silverstein:
And then as you get in later life cycle, we start doing other things that are really more related to, you know, compliance itself. So all of our tools essentially follow that most material moment, which is a fundraise. Things that you need to do before and after a fundraise, that’s usually a growth moment for us. With in between fundraising rounds, there’s lots of interesting things that, companies will be will do from a product perspective that are not, like, simple MAU type metrics. They’re just indicative of something we think might be happening next. And they’re not necessarily selling moments. They’re typically moments for us to be ahead of an engagement and education opportunity. If we see a customer do something behaviorally, you know, we think of maybe even a matrix of things like your 4 nine a is expired and you haven’t issued securities in this number of days.

Daniel Silverstein:
You we think this means x. We put them somebody in a trigger based playbook. We’ll reach out to them, try to get ahead of what we think they’re gonna do next or not do next. Sometimes it’s churn. Sometimes it’s not. Sometimes it’s, something more proactive than that. And what we’ve done is we’ve built we actually have a a couple of different ways to do more formal education. We have a customer education training program, call it like an admin certification thing, where we do broader scale, you know, webinars, things of that nature.

Daniel Silverstein:
And then we have an actual in house content team, that delivers, like, small video tutorials, 45 seconds to a minute on how to do things in the product the product won’t tell you to do. So, you know, just imagine, like, we a customer hits a a trigger of a life cycle we think is interesting. It’s not a selling moment. It’s not probably a retention moment. Is it more of a, hey. We think you’re about to do this. The product’s not gonna tell you to do y, but we know you just did x. Let’s show you what you what that is in a way that’s digestible on your own time.

Daniel Silverstein:
So we can deliver those things digitally. We can do them, you know, live. We can do all different ways of doing that, but it’s all trying to get ahead of the moment before somebody knows what it is and leave them with something they didn’t know before they talked to you.

Jon Johnson:
Yep. Yep. Is is this something that you find with your CSMs? I mean, it sounds like they need to have some deep understanding of this just industry in general. Yep. Is is this is there a pretty heavy, like, learning curve when you hire folks? Are you bringing people from, you know, equity management firms or, you know, PE firms that have experience in kind of cross training?

Daniel Silverstein:
We do that on the venture capital and PE sides of our business, most definitely. Like, that is a prerequisite. Yeah. Because those are, you know, especially in private equities, are very sophisticated buyers. Like, you cannot hire somebody without pedigree, background, knowledge, all those things. On the cap table side of our business, we not so much. We we’re very fortunate. We have a very tenured team.

Daniel Silverstein:
I think there’s there there’s at least one person on our CSM team that’s been here over 8 years. Wow. The average tenure is probably north of 4 at this point. So we don’t require it on the way in. We do encourage people to take the certified equity professional exam. There are three levels of that. It definitely is the best proxy for the work that we do here, in terms of understanding what a private company would be doing with an equity plan. So we do encourage that.

Daniel Silverstein:
Carta pays for people to take the exam. Yeah. It’s actually now being built into our employee leveling architecture, across not just CSM, but we’re working on this for support and implementations as well. The idea being that, you know, if we get to a point where AI does solve some problems for us, maybe in support as an example, if the if AI solves easier, simpler tickets faster than what you should be getting is more educated agent on the other side Mhmm. Who is not in a hurry to get off the call because they’re not trying to hit an SLA.

Josh Schachter:
They’re trying to

Daniel Silverstein:
actually help you. Yeah. So we we we do think about that. The certified equity professionals, the best, sort of proxy to that. And then we have, you know, all kinds of, like, in internal enablement training things to get people brought up to speed on the knowledge that they need, to to be an adviser. But I think, you know, by and large, a lot of people here take it upon themselves. And we do have, like I said, a lot of people who do have even before Ricardo was really initiating, pushing for the certified equity professionals. Example, a lot of people have taken it upon themselves, especially our enterprise team.

Josh Schachter:
I wanna turn the conversation to, market conditions. Sure. So yeah.

Jon Johnson:
They’re great. Right?

Daniel Silverstein:
That’s the answer.

Josh Schachter:
They’re they’re awesome.

Daniel Silverstein:
They’re better than that.

Josh Schachter:
And they’re already

Daniel Silverstein:
What is this? 2021, guys?

Jon Johnson:
Yeah. We’re feeling great.

Daniel Silverstein:
Yeah. Feeling great. Up and

Josh Schachter:
to the right.

Jon Johnson:
Money’s free. Everybody’s going public. Right?

Josh Schachter:
Everybody’s going public. Well, so so yeah. So you’ve got the sticky product. Right? That that’s a must have. And at the same time, nobody’s going public. Right? It was a very dry year, and we’ll see what happens. I I think 2023 was as well, probably. Right? In 2025, who knows what’s gonna happen.

Josh Schachter:
Right? But but all kind of signs point at this at similar stuff, the SaaSPocalypse that I’ve heard of. Mhmm. So how do you how does that impact you’ve got these 2 opposing forces, the stickiest product out there and yet market conditions that suck. Yep. How does that affect you as a leader?

Daniel Silverstein:
Quite a bit. And something unique about our product is that, it is a life cycle product, which is great and sticky to your point, but it has built in churn on the bookend of both sides actually. The the, you know, the SMB customer who never raises and goes out of business. The common problem will probably be a problem forever. The IPO is the the other side of the bookend. Right? Your company gets to a certain stage and size. We no longer have a public software product. We did for a good period of time for 3 or 4 years, but it was really intended for, a different use case than your, you know, typical tech company going public on the platform who has large international populations and a dependency on retail brokerage and wealth management and other things.

Daniel Silverstein:
So, it affects us quite a bit. We watched in 2021, jokes aside, lots of companies go flat out of here, whether it was just through a direct listing, a traditional IPO, SPAC was a big thing in 2021. Lots of people racing to get out the door. And, you know, sadly, a lot of them are not performing particularly well on the public markets today. So it impacts us quite a bit. We have to prepare against that. And it’s an interesting dichotomy in our enterprise book where most the churn and IPO comes from and the thing that I have to watch out for. We’ve actually segmented our enterprise book accordingly.

Daniel Silverstein:
We think about the problem that you’re solving for a company who’s waiting for that window to open, which is a lot of them, differently than we think about the one who has not maybe yet gotten to that window or opened that door yet. The ones who haven’t are still business planning. They still are thinking about, like, what they should be doing next and how we can help them and very interested in EBRs and maybe they haven’t run a tender offer or a secondary of any kind yet, and we can do that with our platform. And, we engage in a very different way. But the ones that are just kinda are waiting, they need us still very much, but we’re in a more of a, like, how can we help prepare you for that, including an IPO advisory service. Like, we can do stock splits. We can run you through a checklist. We can even help go find the right provider to go to, but we it’s in a the those companies who are in that stage require more technical help from our support and tech technical lead teams, to help get cleaned up.

Daniel Silverstein:
And we have to identify them and treat them differently than we treat the companies who don’t know yet. And so we have our eye on this. I clearly, as a leading indicator of potential churn, for sure, our CFO cares greatly about that. And it’s just built in part of our life cycle product is that eventually when the market does turn her back around, we will watch a lot of these companies go. The best thing we can do now is help give them, you know, our version of public knowledge, which is let’s help you get ready. Let’s get you a a good a good outcome. Let’s make your CFO look great. Let’s make everyone happy and have you come back and look at heart of your experience as the best private experience you could have possibly had.

Daniel Silverstein:
And even if we weren’t in the public space, we’re public and knowledgeable enough to be able to get you to the, a good exit and the results that you wanted. So we’re we’re looking at that very carefully. It’s, you know, as we look at subscription ARR, obviously, we have to think about what it means and how to model that out. Well, like, to your question, Josh, like, how do we think about 2025? We have to think about that not just for churn, but we think about it for expansion and how we think about companies, you know, with, you know, either rifts or layoffs of of some size and then slow growth coming back in, the difficulty in time between fundraising rounds, to adding more shareholders to the cap table, which is how we make our money. We have to model expansion differently, and that is largely bottom line revenue to us. And, you know, that’s maybe the bigger thing we think about is not so much about IPO churn. It’s more how do we think about, like, the growth of the cap table business in a world where it’s hard to know, how VC conditions will pick up specifically for the segments of our business where we typically get most of our expansion.

Josh Schachter:
And how how are you thinking about that? Like

Daniel Silverstein:
Very conservatively now. We we 2024 was actually probably the toughest year we’ve had in a long time, in that regard. You know, we were when I got to Carta in 2019, our NDR was, like, best in class, like, couldn’t have been better. It was almost one of those who I can’t believe we’re even building a post sales team. We don’t need this. Problems are solving themselves. Right? And as we built the upsell motion, I think what we realized at Carta is that wildly successful, and we still know how to do that very well. But as a percent of total, when you look at NDRs, you know, large math equation, expansion is really where most of the money comes from.

Daniel Silverstein:
And, you know, expansion is organic. Here we measure that in stakeholder growth at the time of a renewal. And, you know, those conditions post 2020 have been turbulent. And so we’ve had to find different ways to model that and different ways to think about getting the team and model that you’re built for maximum efficiency so that when it comes back, we get it more efficiently. But in terms of forecasting and modeling, we look at the data that’s coming from our valuations team. We look at all the same public sources that everyone else has. We’ve got lots of industry experts here. I don’t know if you guys have heard of Peter Walker who works for Cardeas, our head of data insights.

Daniel Silverstein:
Lots of really interesting data coming through our system, anonymized and aggregated that we can use to source off of. And we model it. And this year, we modeled, you know, challenging year. Next year, we’ll be a little more conservative in how we model it. And we’ll think about other ways to continue to get more growth in the business that are not dependent necessarily on market conditions.

Jon Johnson:
Yeah. One of the things that we’re we’re facing, and a lot of people in the market as well, is this idea of consolidation. Right? So we recently Who

Josh Schachter:
is we? Who is we?

Jon Johnson:
My company. User testing. So we were recently bought by a PE firm who also bought a competitor and then just kinda, like, smashed this together. And it’s been a it’s been a learning experience for me as well coming from a public company that was taken private and then into the PE world.

Daniel Silverstein:
Yep.

Jon Johnson:
I’m curious from your perspective. I would imagine, when you’re seeing a lot these consolidations where there’s a lot of m and a, there’s a lot of kind of Mhmm. We see it as almost a downgrade because you go 2 to 1. Right? Yeah. Are you seeing a similar experience, and and how does that affect what retention looks like for you guys when you’re seeing a lot of these m and a’s? And and that is that is a life cycle. Right? So that’s a that’s a step in what you manage.

Josh Schachter:
Yep.

Jon Johnson:
But walk me through kind of the inverse of that. Right? Because if you

Daniel Silverstein:
got

Jon Johnson:
a bunch of people going public and leaving you, I would imagine when PE comes in

Daniel Silverstein:
Mhmm.

Jon Johnson:
And takes everything private, you actually have the the inverse of that.

Daniel Silverstein:
Yeah. We don’t we we definitely, we do see some of that. I would actually say, by and large, m and a would be what maybe our second biggest non controllable churn outcome more broadly. So, you know, if you think about our churn as, you know, IPO being maybe the biggest, most notable, uncontrollable churn outcome, m and a and dissolution would be the others. A dissolution is by volume of logo is the highest. So by dollars, the lowest because it’s just a lower market segment that we’re talking about lower ACV. But m and a is in the middle of that. So we pay attention to it because oftentimes you end up in a situation where, one card of company is acquired by another card of company.

Daniel Silverstein:
That’s not uncommon as an outcome. And, you know, for us, it sort of nets out pretty equally. It’s not a huge difference here.

Josh Schachter:
How do you explain that churn to the board? Like

Jon Johnson:
Yeah. Yeah. Exactly. Yeah. Yeah.

Daniel Silverstein:
Yeah. I have good question.

Jon Johnson:
We’re trying to figure

Daniel Silverstein:
it out? Yeah. No. It’s actually not that one’s not terribly difficult because the ARR nets out relatively flat either way. It’s, you know, we have to keep our eye on the name of the logo itself just to make sure there’s an awareness there just from our network within our board and investor network for sure. That one’s actually not terribly difficult to explain. The harder one is more when the company is acquired by a non Carta company, or the or we have, like, a situation where we could have connected the dots and we didn’t, for whatever reason. And m and a transactions are tricky. We don’t if you’ve been through them before and John tells you have to some degree, like, it’s you don’t know until you know there’s not a lot of transparency around it.

Daniel Silverstein:
We’ve talked about different ways of trying to do m and a as a service at Carta to get ahead of events. We have ways of thinking about that. We’re not in paying agent services or anything like that today, but we could Yep. If we wanted to. It doesn’t you know, we don’t that one does not bother me as much. That is a more of a we watch the trend in what you’re mentioning is what we’ve seen quite a bit in the last year or so of, you know, private equity taking 2 companies that are both private together and combining them into 1. We’ve seen quite a bit of that. I don’t think we’re done.

Daniel Silverstein:
M and a conditions are looking, very favorable for an outcome like that. Yes. Expect to see a lot more of it. So if anything, that’s more of what we’re modeling against is the activity we think will be there, where we think the churn might hit in our in our books, how to predict it maybe similarly to how an IPO trend would look, following market conditions to understand where we think M and A activity is going to be and what segment it’s gonna hit. And then, you know, it’s

Jon Johnson:
a bit of a roll

Daniel Silverstein:
of the dice because like I said, sometimes it the other company that acquires them is already a card of customer. If it’s a PE firm, probably not. But the outcome of of, like, 2 t 2 companies merging together and keep merging their cap tables, the ARR is negligibly different for us unless there’s a rift that’s associated with it, which sometimes happens.

Jon Johnson:
Yep.

Daniel Silverstein:
You know, largely is is a retention motion more than it is a churn one for us.

Jon Johnson:
That’s great. Sounds like you

Daniel Silverstein:
have a lot

Jon Johnson:
of data. You’re you’re looking at a lot of trends. How are you thinking about I mean, you know, the kind of the big words that we’re talking about is AI and how we’re using kind of some of this predictive modeling. I know we were talking a little bit about, some kind of experience around how to utilize AI when it comes

Josh Schachter:
to a

Jon Johnson:
predictive side, not just with customer health, but also, like, are we using the tea leaves correctly? Mhmm. You mentioned that you were out in San Francisco, last week, at the CCO club during SaaSter. I’d love to kind of hear some of your thoughts that you shared out there, but also kind of, you know, wrap it into this conversation. This is something that Josh is is super passionate about as well. Like you guys are pretty aligned on it. Mhmm. So I I just kinda love to hear how you’re kind of thinking about just AI as a predictor of analytics and and and health scores and what health looks like from a a digital touchpoint.

Daniel Silverstein:
Yeah. So I I think I’ve I’ve said this many times about our model at Carta. I consider it an advantage. I think some people maybe consider it a disadvantage to have a non daily use product with low ACV and having to be scaled from day 1. Yeah. Somebody might say that’s your right for AI. You should be using technology like that to predict everything. We we tried.

Daniel Silverstein:
We upfront. We didn’t it wasn’t an AI problem in 2019, but it was a, like, what are we gonna do with data to figure this out? Right? Let’s, we would have to look at patterns across massive segments of thousands of customers instead of a one to one validation of customer health outcome, which we can do in enterprise, but not mid market or SMB today. We built we partnered with our data team in 2019. We built a very sophisticated churn prediction model in health score, And I put it in exec decks, and it just sat there stagnant and static and, you know, with gets skipped over in presentation mode. And, it’s I was having somebody from the program management team update this thing once a month with no meaningful movement between red, yellow, and green.

Josh Schachter:
What were you showing? What what what was the, like, what was the format of this report you were spitting out? It’s what we put

Daniel Silverstein:
pump it out into a bar graph of red, yellow, green, and movement over time, basically. But we were the inputs of this thing. So the the broader context here. If you look at this, we were, like lots of, you know, CS teams and post sales teams at the time. We were, you know, we were building the post sales motion and selling and all those things, but we were also looking at MPS and where that fits in the equation, how all the the CSAT things that were coming from other parts of the organization, like how to mass like, build the health score, if you will. But it was going into a a master delivery deck that was being put in front of the exec team to to review once a month. Then it was in the relevant slides of, like, somewhere between, like, churn and, you know, upsell or somewhere in the middle of it. It was, like, oh, well, how’s the health for our customer base? Right? How how are we doing? How’s this how’s this going? So it was a red, yellow, green, stacked bar graph.

Daniel Silverstein:
You know, like, little time. Distribution of percent of number of customers in each month over month, and really largely not changing at all. Our inputs were some of the inputs we still care about greatly, for different reasons, and we use them as triggers and predictors of things. But it was not actually indicative of anything that was gonna be happening at scale that anyone needed to know about. And so

Josh Schachter:
At scale.

Daniel Silverstein:
We we deprecated it because it was not, you know, showing value enough for it’s definitely not for an exact audience to read. They would, again, skip past in presentation mode. At some point, we just stopped updating it, and then, eventually, I just killed the slide.

Josh Schachter:
Were you doing it for strategic accounts as well, or was it more of the scaled segments?

Daniel Silverstein:
We were doing it for everybody. For everybody. In in 2019, we actually had much more acute understanding of what was going on with those strategic accounts. And those ones, you know, red, yellow, green, we could could validate 1 by 1, and we did. And we were having candidly lots of product related churn in 2019 for our strategic accounts. So it did help us inform what to build and where and how to fix for those customers. And we did, you know, keep some level of, like, even CRM data on health for those customers. But, you know, those were it’s a very reactive we found out that this customer is coming up on the renewal.

Daniel Silverstein:
They will need some massive commercial help to get through this renewal and this laundry list of things to fix before they renew next year. And so we’re not we’re no longer not staying with our strategic customers at all. But we stopped doing it because it wasn’t you know, we maybe were trying to apply the math against the scaled segments the same way we were against everyone else. And it was just sort of like, oh, we don’t doesn’t matter how long somebody’s done it’s been since they did x or y or how many securities they issued in the last 90 days. Like, that’s not doesn’t matter for an enterprise customer, but it does maybe for SMB. Mhmm. So, you know, we built this thing as a predictive tool for us, and the data team kept updating the model. You know, we had difficult times validating it on a one to one because we were just not interacting with as many customers one to 1 as you would like to.

Daniel Silverstein:
And, you know, so what we did with it is over time, we deprecated the model. We asked the data team to help us focus on other things and help us build triggers for liquidity transactions and other things that we think are more important and more complicated to build from a data perspective and then took the engagement moments and built out all our playbooks. So imagine a world where I’m not necessarily reporting on that the same way anymore, like this, like, stack bar graph and change over time. But the engagement moments themselves, we broke them out. And rather than having them all being inputs to the health score, they do become, like, possible triggers for, for, like, engagement with the CSM. Like, one of those components, you know, security issuance being one of them, you know, time elapses since last security issue, that’s generally a problem for us to be aware of. That could be a trigger for an outreach for other reasons depending on the time since the last fundraising round or round type or something of that nature.

Josh Schachter:
It sounds a little bit more like a traditional CSP, CS platform approach.

Daniel Silverstein:
You got it.

Josh Schachter:
Yeah. That’s right. Yeah.

Daniel Silverstein:
That’s right. But we have, like, mounds of data that were built into that model that we just don’t use for that purpose. They’re not it’s not built for a customer health score. We have some of that stuff, like, you know, red, yellow, green, if you will, at the validation level in the c s CSP, but we’re not, not reporting outward to that. It’s just an internal use thing.

Josh Schachter:
That’s so interesting to me because you hear so much about, you know, within AI, it’s such an obvious use case to help people out with a, you know, a matrix of John, I’m I’m such a bad multitasker, and I can’t hear your typing.

Jon Johnson:
Oh, it typed. I’m so sorry.

Josh Schachter:
My my brain is so tender already with my thoughts. I didn’t realize it. No, it’s okay. It’s okay.

Jon Johnson:
Thank you for calling me out live on the podcast. Oh, that’s what I

Josh Schachter:
but, you know, that’s our that’s the nature of our relationship. So, yeah. No, no. But anyway, so so, so with with AI, like, it it feels like such an obvious use case of of give me an AI generative health score. Mhmm. Dump in all the inputs, and it’ll spit out all the outputs. And I actually think there’s some some tools out there that are that seemingly doing it very well. I haven’t used them myself, but they’re they’re peers in my in in my in my network here.

Josh Schachter:
I don’t know. I I had a thought there. It wasn’t just a statement. My typing distracted. You screwed me up. Just, John, Where do I go

Daniel Silverstein:
from here, John? You’re

Jon Johnson:
not pretty sure to edit this part out?

Josh Schachter:
No. No. No. There’s no edits.

Jon Johnson:
Leave it in Denali.

Josh Schachter:
Yeah. Yeah. I got nothing. I don’t know. I had a thought.

Daniel Silverstein:
Let me say this I will say this. Like, the it’s meaningless. No matter what technology you’re using or not using, it’s meaningless if you don’t know what the moment is.

Jon Johnson:
Oh. Yeah.

Daniel Silverstein:
Like, it will never fix that for you. And Can you for how things are not by themselves, by definition, will not help you find the moments. You have to

Jon Johnson:
go there. Expand on that a little bit? I that line is so important. It’s meaningless unless you know the moments, especially in customer success. We’re talking about predictors. We’re talking about health scores. We’re talking about all these things. How do we know what we need to fucking do? Like, this is, like, the biggest problem, not just from a CSM standpoint, but also from, like, senior leadership. It’s like, what are our CSMs doing? Right? But how do you not only, like, how do you identify the moments, but how do you engage and train ICs into finding their own moments? Because it’s not a playbook.

Jon Johnson:
There’s not a list of 10 things that you do. It is there’s an intuition that CSMs have. And I get so excited about these moments and these conversations because there is that moment that you go, oh my god. This is this is an inflection point. I can get in here, and I can fill in the blank. Right? So Yep. Walk me through just the way that you decided that that that phrase seems practiced. Mhmm.

Jon Johnson:
But it’s also very it carries a lot of weight. It’s not

Daniel Silverstein:
practiced at all. I promise. Just just once if you want those. Yeah. No. It was not. But but it is very I do feel pretty strongly about it. And it so this is listen.

Daniel Silverstein:
It kinda goes back to what I was mentioning earlier. We a lot of what I think I have here, some people might consider a disadvantage. We’re all in the background here of, Card having strong product market fit and, you know, to the earlier point, it’s like it just, you know, not a must have but, you know, is a very, like, important part of your your business that you’re not gonna move elsewhere unless you have to. Right? I would say that, like, the constraints, and I think about this stuff a lot. You know, we practice this at Carta often. Like, the best ideas are kind of born out of constraint for us and for me, and I think about that a lot. The life cycle learning life cycle of a venture backed company is, you know, whether you do it by taking a CEP exam and getting certified 1, 2, and 3 and understand the complex equity structures that somebody could have or not, you can do that, and that’s great. And it will help you understand complex customer problems.

Daniel Silverstein:
But understanding the actual venture backed customer life cycle, we that’s that was the prerequisite for getting the moments figured out now. And if you do this long enough and then you don’t have to do it a really long time, we built a lot of this stuff in for CSM as a partner onboarding program to understand, like, you know, what does q one mean for tax and audit reasons, Thinking about it that way, what happens when venture goes away in July entirely on vacation to wherever often to, you know

Jon Johnson:
Well, hot selling folks.

Daniel Silverstein:
Yeah. Exactly. Wherever wherever they go, wherever I’m not. And, you know, what do you how do you think about, like, engagement during those months of the year? How do you plan for, you know we have a compensation tool. How do you build that into annual planning? How do you, like, find the moments that you know that are happening in the life cycle and understand the problems of the persona that that might be working on those problems during those periods of time. And we’ve layered on, layered on, layered. I mean, it started with very basic things. Here at CSM, I you know, me coming into this not knowing a whole lot about it, but learning the life cycle was like, hey.

Daniel Silverstein:
You know, really simple things. They should be very simple. But, hey. You know, we do once a quarter that our product can also help you with board meetings. Are we communicating on the cadence that actually follows a board meeting? Because we do that. We have a board tool. Like, or how are we thinking about, like, prepping somebody who’s prepping for a board meeting? When you maybe aren’t talking to the CFO, but you might be talking to somebody in the office of the CFO Yeah. Who is going to report to the CFO, and how do you engage with them to help them with that problem? A lot some of this is, like, helping build champion advocacy within an account, not a buying problem, but a, like, listen.

Daniel Silverstein:
You’re the controller. You’re gonna run this cap table at Carta. You’re ultimately gonna report your information upwards to VP and then to the CFO. The CFO is not gonna wanna talk to Carta unless there’s a liquidity event. Yeah. Because that’s when it becomes the, like, you know, hiring in hireable and fireable offense, if you will. Yeah. The whole, you know, nobody gets fired for hiring IBM problem.

Daniel Silverstein:
The you know, helping advocate in that way. And so if you build if you go through the life cycle of a venture backed company and, again, unique. We’ve used our product. We know our product. We know the life cycle of our own product. You introduce the framework of communication around that, and you and sponsor some creative thinking from the CSM team around things that are happening for that persona as they build a relationship with them over time. And it is a, like, monthly, quarterly, semiannually, annually. And, you know, the longer somebody’s been in their own book of business talking to customers, they’ll find lots of their own moments in there.

Daniel Silverstein:
You know, we standardized some EBR type templates, but I think there’s a lot of leeway for, depending on if you are getting to an upper level of an organization, that person’s problems become bigger problems than the person you’re talking to. Now when we released our total compensation tool, then you’re bringing HR people in when, normally, it’s finance. So you’re you’re, there’s there’s a framework that we built around this that’s the foundation for all of it, but lots of creative moments in between. And what we’ve done recently in the last year or so is tried to make it a little bit more scalable, again, built out of constraint. If mid market books will continue to grow massively and headcount will not grow linearly in that way, We’ve identified some, like, data moments for what a high and medium touch customer should be in mid market who maybe has not expired wallet share, still growing in valuation and stakeholder growth. We know that they’re still kind of in that growth mindset of their world, but, stamping them and allowing CSMs to identify those quicker and run specific plays around the top 200 in mid market, and, again, zeroing on the persona that you’re talking to, understanding who they’re reporting to, trying to get that person, in a position that they feel good talking about Carta to their boss. And and, you know, in the end, one of the reasons that I ended up doing this is you learn these things also out of escalations.

Jon Johnson:
Right.

Daniel Silverstein:
And things that go poorly as well when you find somebody this we’re talking about the gravy predictive analytics proactive stuff, but you also learn from reactive things Yeah. That we did it wrong. Like, we didn’t talk to this person, realize that, like, they’re actually the person that you needed to win over, and you were you were not speaking to the problem they were trying to solve. So it’s a lot of very persona based, communication, but it’s all built on the same foundation.

Josh Schachter:
I think we’re gonna have to leave it there. We’re a little over time. Daniel, this was great. There’s

Jon Johnson:
3 things Seriously.

Josh Schachter:
3 things that I love here. I love the nature of the business because to make money, you have to follow the money trail. You guys have followed the money trail. Right? You’ve got access to all that data, and Mhmm. You could just become the the company for all things financial advisory services. Right? And that’s probably in the deck pitch somewhere. So that’s the first thing I love. The second thing is I love how you are training your people on the journey of the personas of the different stakeholders that are in the customer seats.

Jon Johnson:
Mhmm.

Josh Schachter:
And that’s how you’re educating on them them on that. And the third thing I love is about you. You are a sleeper leader in the industry. You’re not out there on LinkedIn posting this and that. You did you did do a panel last week. We won’t hold it against you. You did a panel, right, like John mentioned. But here’s a guy that’s at a world class company.

Jon Johnson:
Yep.

Josh Schachter:
It’s running 200 folks. 200 folks, all of post sales. And do you wake up on Monday morning thinking of what you have to post on LinkedIn, Daniel? No.

Daniel Silverstein:
I don’t. I

Josh Schachter:
think that’s why

Jon Johnson:
you’re you have a smile on your face most of the time. Yeah.

Josh Schachter:
I love that. I love it. I love it.

Daniel Silverstein:
The lack of social media will definitely bring a smile to your face. I’m not, you’re all correct about all those things, Josh. I’m not a self promotional person. I do care a lot about the work that I do and maybe I learn more about that than I do about self promotion. And, you know, I do love the conversations though. So I would like to do more of them, with folks like yourselves to have very candid discussion around what is real and what’s not. Part of being in a world where you’ve done account management and post sales for a really long time. And I’ve done them in noncontract, low margin businesses that really force very disciplined thinking around the activity and, again, building this out of constraints, that mindset.

Daniel Silverstein:
You know, I think people see that as a downside thing. I think it’s great, and I love the more creative conversations they’re having around that as opposed to what CS became for a long time, which was quite the opposite. Mhmm. And so a lot of the discipline is coming into it. Maybe that’s why I’m coming out of my shell a little bit. Don’t expect me to post on LinkedIn, on on the next day morning.

Jon Johnson:
That’s fine.

Daniel Silverstein:
But but why I’m coming out of my shell a little bit on this stuff is I do think it’s important that we’re all, like, thinking practically. A lot of folks who are forced into this discussion now that are not comfortable with it, could benefit from hearing from people that maybe feel more comfortable with it or they’ve been doing it longer.

Jon Johnson:
Yeah. Well, it sounds like we need a set a follow-up on this. So, I I’m really thrilled with this conversation. Stoked on everything Josh said. I also love everything that you said, plus this just view of revenue, like, that you have such a an eye on the fact that you need to drive revenue. And this is the big question. So we’re gonna leave that open, and, and I hope that we have an opportunity to to kinda continue this conversation. Good luck on everything that you’re doing at Carta.

Jon Johnson:
Thank you, Brad. We can’t wait to not see what you post on the Internet.

Josh Schachter:
Thanks, everybody.

Daniel Silverstein:
You cannot follow me.

Jon Johnson:
Right? You will not. Yeah. Bye.