Listen to the Leveling Up Podcast

Daisy Founder & CEO Gary Saarenvirta joins the Leveling Up Podcast with Eric Siu to discuss how autonomous enterprise company Daisy Intelligence uses AI to drive high impact business decisions worth billions of dollars.

 

Original Source: Growth Everywhere Website.

Leveling Up Podcast Transcription

Introduction

 

Eric:

You’re listening to Leveling Up, where we’ll show you how to win at the game of life and business. It’s time to power up your skills through life gamification with your host, Eric Siu.

Alright everyone, today we’ve got Gary Saarenvirta, who is the founder and CEO of Daisy intelligence. you see that, you nodded. I got it. I got it. An AI powered platform that helps retailers and insurers drive higher profits by optimizing their price and promotion mix. Gary, how’s it going?

 

Gary:

Fantastic. How are you today Eric?

 

About Daisy

 

Eric:

I’m doing well. Thanks for asking. So yeah, I mean, I just gave a mouthful in terms of the introduction of the company. I mean, but could you explain kind of who you are and explain a little more about the company?

 

Gary:

Sure. We’re a, we’re an AI platform. We deliver as a software as a service, and we help our clients make smarter operating decisions. You know, so in retail, the operating decisions that impact profitability are what’s the weekly combination of products to promote? What’s the weekly combination of prices? And how much inventory should I allocate to all my stores? Those are the key inputs that determine retail profitability. Our system delivers the answer autonomously, with no human in the loop. And in insurance we help insurers decide what claims to adjudicate, whether to deny for fraud or not, and then underwrite the incoming quotes for policies. And those are three core decisions that similarly impact insurance profitability.

 

Eric:

Got it.

 

Gary:

So, we fundamentally help companies make smarter decisions that impact their profitability.

 

Eric:

At scale too, right?

 

Gary:

At scale. Yup.

 

Eric:

Cool. So —

 

Gary:

With no human in the loop. Autonomous AI, right?

 

Who Are Some of Daisy’s Clients?

 

Eric

Sounds amazing. I mean, it sounds like a no brainer for everyone, right? Who are some clients that you can, that you’re at liberty to name?

 

Gary:

Yeah. A big retail client of ours is Walmart Canada, has been a client for, for several years. On the insurance side, we have Green Shield Canada as an insurance company, Alliance, as a global insurance player. Those, those are some of our big brand name clients that people would have heard of.

 

The Daisy Story

 

Eric:

And I’m curious, Gary, how did you come up with this idea? What is your story?

 

Gary:

Well, my background is in aerospace engineering. I have a graduate degree in that, and when I graduated from University of Toronto, Canada doesn’t have much of an aerospace industry. We gave up the farm in the 60s when we killed our Avro arrow program. So, I ended up working in big companies and I was just really shocked at how little math and science big business use compared to the engineering and science world. So, I accidentally walked into this career to help bring more math and science to business, to help them operate smarter with a goal of making more income. That was always my motivation. So, that’s how I kind of walked into this opportunity. And I worked at a company called Loyalty Group that runs a large coalition loyalty program with retailers and ended up being one of the first worldwide users of IBM’s data mining. That was the buzzword for AI in the 90s. Data Mining. The terminology has changed much faster than the technology. So, I’ve been playing with machine learning, neural nets since the late 80s, early 90s.

 

Eric:

Wow.

 

Gary:

And then I ran IBM Canada’s data mining practice for three years. And then I founded Daisy after I left IBM. And so yeah, I’ve been, I’ve been a longtime person in the space. I went to all of Geoffrey Hinton, who’s the godfather of deep learning, he was at University of Toronto. And I attended all his industrial seminars and lectures back in the late 80s, early 90s.

 

Eric:

Amazing. So, you’ve got a super AI background.

 

Gary:

Yeah. Combine that with the engineering, I think that’s the real, the real difference.

 

How Does Daisy Make Money?

 

Eric:

That’s, it’s amazing sometimes when you think about, yeah AI is a trend, but you mix it with your engineering background and beautiful things happen. So, Gary, how does the business work? How do you make money exactly?

 

Gary:

So, we’re a software as a service. So, we charge a subscription fee to our clients based on which of our products they use. So, it’s that promo mix optimization, price mix optimization, inventory allocation, those are our, kind of, core offerings in retail. And so, we charge per offering, it’s a monthly fee. We typically sign you know, one-year, multi-year contracts.

 

Eric:

Got it. I’m assuming, there’s different product levels, and I’m assuming you charge based on usage?

 

Gary:

No, it’s based on the size of the company, because that impacts how much data we have to collect –

 

Eric:

Right.

 

Gary:

Maintain that cost of infrastructure. And then the number of products impacts how many optimizations or mathematical computational runs we create. How frequently we deliver decisions, is it daily? Weekly? that impacts. And then how do you plan? Do you plan at the national level? or regionally? or by down to the store? You know, so those are the kind of variables that impact our cost of computing.

 

Eric:

Got it. And I’m assuming these annual contracts, they’ve got to be six to eight figures a year?

 

Gary:

Yeah. I mean, our average contract value is about half a million dollars a year. That’s, kind of, kind of, we have some that are smaller, some that are bigger. You know, as we prove our value, our price is going up a little bit. We anticipate a probably average contract might be double that over the coming few years.

 

How Many Employees and Clients Does Daisy Have?

 

Eric:

Got it. That’s amazing. I’m looking at some of your numbers right here. What, what kind of numbers are you at liberty to share around the business? Could be growth rates, employee size, revenues, and all that.

 

Gary:

Yeah. I mean, we’re currently about 60 employees. We’ve grown over the last, so we really, kind of, went generally available with our recurring revenue product in 2016. Since then we’ve grown over 1,000% We finished last year over 5 million in ARR. Yeah, we’ve got about 20 clients today in five countries. Yeah so, we’ve been growing fast. The plan before COVID was to triple this year. We just did a fundraise in September, but COVID, kind of, hit the big pause button. We’re very lucky that our customers are mostly grocery customers. So, they’re not negatively affected yet–

 

Eric:

Essential. Yeah.

 

Gary:

And insurance companies. So, we’re very lucky that our markets were, kind of, stable through this. And we feel very fortunate that it hasn’t impacted us too much. It’s certainly slowed growth. And we had to make some plans to preserve cash. But other than that, we’re, we’re still alive and getting back to growth as the world comes back to life, so.

 

How Does Gary View Culture and Leadership?

 

Eric:

Got it. Yeah, that, that’s amazing. I think you’re poised for even more amazing growth when this thing eases up. I asked you a question before we started around, kind of, current passion points right now. And I am really obsessed over culture, leadership right now. I think I will continue to be, but I guess from an engineering mindset, because the way I look at process, or leadership, or culture is these are just tools that you plug into the operating system and then the machine hums better. So, how do you look at it from an engineering mindset? I guess all three of these things.

 

Gary:

I mean, for me, you know, I spent most of my life being technical and focused on the technology. But over the last several years, as I’ve been the CEO of this company, I’ve realized that it’s all about the people. You have to have the right people on the bus. Do I have the right people in the right jobs? And then is the culture conducive to success and scaling? Are the people passionate about our mission? And so, I think technical skill is a commodity, attitude and cultural scale is the real unique defining secret sauce. So, we’re just trying to, trying to figure out how to identify people who are passionate in the same beliefs that we are, because if we’re all pulling on the rope in the same direction, and everyone’s passionate and loves being here, loves the mission, then I think we’ll be wildly successful. You know, I think that’s the focus. And focusing on how to foster that, and motivate people, and meet everyone halfway. I say to the employees, you got to meet us, you got to meet the company halfway. We’ll meet you halfway, you know, it’s a partnership.

 

What Has Gary Done to Improve Culture and Leadership?

 

Eric:

Right. And, specifically, what have you done to improve culture, leadership, sales process. Like what resources, what things have you consumed to just improve?

 

Gary:

Yeah. I think we’re, you know, outside coaching for sure. From experts. There’s a lot of great books out there, I have been consuming that. And then just really focused on, I think the one thing, I always thought you get a bunch of smart people, they could figure anything out. Well that, that’s totally wrong. I have a bunch of smart people, but you still have to give people direction, crystal clear instructions, crystal clear expectations, follow up, guidance. And, and I think having, that’s what we’ve really focused on, is making sure that everybody understands what they’re, being asked of them, getting everyone’s feedback to say: Is this realistic? Am I asking you something that’s doable? So, making sure that everybody buys into the ask, and then continually following up, repeating, and then taking care of employees. I’m a big believer, and if we take care of our employees, then they’ll take care of us. And try to make their lives easier, you know, within reason. We’re in this boat together, we share our life. Work is like, you know, a big significant part of your life. So, it should be, should be something, we’re a big family. And so, I feel strongly about that.

 

What Does Daisy Do to Take Care of its Employees?

 

Eric:

What examples, you just mentioned taking care of your employees. And I love that. I mean, what specifically have you guys done to take better care of your employees?

 

Gary:

Well, like through COVID, we, I think we called the office closed like a couple weeks before everybody else did. So, let them work from home. Everyone’s concerned, we could feel the concern about safety and anxiety. So, we said let’s work from home, you know, there’s no reason for you to come in. And we don’t want you to ride the transit and be worried about that. You know, now that people are home with their kids. It’s like, listen, take care of your kids. That’s number one. For those who have, like, young children, figure out when to work. It’ll all come out in the wash. If you got to take care of your kids, do that. We do silly things like send them snack boxes, because we just have snacks in the office. So, we had out snack shippers ship them snack boxes. And, you know, just trying to be flexible, respect people, and then know that your, your family life is important in this tough time. And I think those are important things. And, you know, we’re committed to helping our employees develop and get better. And so, when we get back to business, education, training, those are the things that are on our list. And health benefits, and things like that. And looking for more perks as the company gets more successful, you know, helping people live their life, providing cleaning services at home, or vacation fund, or things like that that really add value to people’s lives, you know.

 

What Kind of Leadership Coaching Does Gary Find Effective?

 

Eric:

Love it. And you mentioned coaching a little earlier too, because I mean, there’s different types of coaches, there’s the ones that will, you know, give you the beatdown, there’s ones that will give you specific advice, and then there’s others that will ask Socratic questions, and even, there’s some that will potentially even make you cry as well when you start reflecting on your life. So, what kind of coaches have you worked with? What’s been really effective for you?

 

Gary:

I’ve worked, I’m working with a great person now who’s very Socratic, and he really makes me peel away layers of the onion. I do feel, walkaway, like, crying half the meetings we have. He’s, like, phenomenal. And he’s helping me grow as a, as a leader. And, certainly, I strive to be better. I think, you know, I don’t believe in beatdowns. I mean, I get frustrated at times, but I don’t, you know, I know that trying to mentor and coach people is more important, and be positive, and ask them how can you help instead of saying: Why didn’t you get it done? You should have had it done. It’s like, well, what can I do to help you? Is there something missing? What did I do? Like be mutually accountable to completion. And we’re trying to get, trying to get better at that. And, you know, certainly trying to motivate people and find out what motivates them. So, I think it’s really important to have a relationship and understand your employees as people and individuals, you know.

 

What is Optimal Control?

 

Eric:

Right. Love that. I guess we’ll talk about that later. I guess, what’s working, what has been working over the years to get you to, you know, the 5.5 million ARR in terms of customer acquisition?

 

Gary:

I think it’s, our technology is uniquely differentiated. We’re not a predictive analytics tool that builds computer science models from data. So, it’s, I use the aerospace method, our, we use optimal control. And which is, I think, the future of AI. Nobody really knows it yet. I think I’ve been in this field for so long —

 

Eric:

What is that? I’m ignorant.

 

Gary:

Optimal control is like reinforcement learning. So, you can’t solve the world’s problems from data alone. Like Einstein would never have come up with a general theory of relativity from data. If you knew the location of every molecule in the universe, you couldn’t learn the theory of relativity. So, there’s a scientific method that everybody seems to have forgotten about. It’s first you come up with a theory, then you get data and you go, you say: Do I have the right data? And if you don’t have it, you build experiments to measure it. Then you validate your theory, you iterate it, then you apply it, then you apply to new domains. And you continue that as opposed to: I have this accidental data set in front of me, therefore it must explain all of the world’s workings. Well, that’s totally backwards. And so, we’re going the other way. So, it’s come up with a mathematical theory first independent of the data. We design differential equations, and then we find data that we use to configure, and we simulate the future, and find the optimal path to the best future possible. And that’s the scientific method. That’s been a really differentiated approach. And because of that, we deliver economic value. We’ve been able to grow retail sales by an average of 3% per year, which is massive. Total company sales, for our largest company, we’ve grown their sales by more than a billion dollars a year.

 

Eric:

Wow.

 

Gary:

And that lowers prices and the cost of living for humanity. That’s really my driving force. If we make companies efficient, they will lower price because that’s what smart companies do. That’s how you gain market share. That means the cost of living for you and me goes down. When we make insurance companies more efficient, insurance gets cheaper. And we want to do this in every industry. And, you know, I can’t control what my clients do with the efficiency we create, but I know the smart ones will reinvest it, and it’ll impact our lives as consumers and citizens, so.

 

How Long Did it Take For Daisy to Reach Product Market Fit?

 

Eric:

Right. I love that. For your product, I mean, correct me if I’m wrong, it sounds like a longer sales cycle. It’s a little more, arguably, a little more complex than what people usually see, right? So, I guess for you with this, how long, how many years did it take you to reach product market fit?

 

Gary:

We founded the company in 2003, right? And so, I built the technology for 12 years self-funded because we wrote like, you know, 100 million lines of code, right? So, it’s not like, we’re not like a little mobile app. I compete with the IBM’s of the world, right? And so, during that time, we worked with dozens of customers. So, we built the technology with customers to make sure that at the end of the day it was a useful product. And so, I’d say it probably took a decade to get product market fit because we started so early. In 2003, people thought I was crazy talking about autonomous business and, you know, so I think –

 

Eric:

I love that. Did you coin that word? Autonomous business? I love that.

 

Gary:

Well, autonomous enterprise. We have a patent that was accepted. If you look at the U.S. Patent Office under my name, you’ll find a patent that was recently approved called the autonomous enterprise.

 

Eric:

Oh, that’s awesome.

 

Gary:

That’s the category we want to own, like autonomous cars. When you see all the logo charts, and you see drones, autonomous cars, right beside that I want to put a box called autonomous enterprise. And in that, retail, insurance, and all the other industry sectors, and our logo. We should be the first logo on that chart. And I want to be the category king for that.

 

Eric:

Wow.

 

Gary:

That’s, that’s, kind of, that’s the, kind of, marketing goal that we have to win that category.

 

Eric:

And I’m assuming you’ve read Play Bigger?

 

Gary:

Yeah, Play Bigger. That’s the, that’s the playbook. I want to execute that. And I think we have all the tools. We have a head start in this AI space because I’ve been at it for 25 years through happy accident. So, I think the world is going through the moment that I had 20 years ago —

 

Eric:

Yeah.

 

Gary:

And so, they got a little bit of learning to do and –

 

Does Gary Have Any Plans For a Book?

 

Eric:

For sure. That’s awesome. I’m assuming you probably have a book coming?

 

Gary:

Yeah, I mean, I have, like, many books in me. I’ve just been so focused on growing the business. I think once the business gets on a path that is going where we need it to, then I definitely will write a book or two about my experience —

 

Eric:

Yeah. The Autonomous Enterprise, that, that’s such a great book.

 

Gary:

Yeah. Absolutely.

 

How Has Daisy Survived 10+ Years?

 

Eric

That would sell well. The reason why I asked the product market fit question a little earlier was because usually what happens is, I just want people to know that, look: just because you build it, it’s not gonna happen the next day —

 

Gary:

Yeah.

 

Eric:

The next year, or the next year after that. Usually it’s like, usually, at minimum, it’s a two to three-year journey —

 

Gary:

Yeah.

 

Eric:

But sometimes it takes even longer than that.

 

Gary:

Yeah, because we have a very complex product that’s really enterprise. So, it’s took a lot longer. And, and I would suggest always build your products with the end consumer participating, whether it’s a consumer product or a B2B product. If you build it for your customer, then you’re more likely to have something that’s useful, as opposed to your great idea, that’s your great idea that, that nobody else thinks is a great idea, right?

 

Eric:

Right.

 

Gary:

And so, you know, I think that was something I learned from IBM.

 

Eric:

Right. And so, I mean, people might say: okay, Gary, you know, that’s great, but not everyone can survive for 10 years. So, how did you survive for the 10 years? Because I’m assuming you didn’t pick up VC money immediately.

 

Gary:

No, no. I didn’t raise money until, I started the company in 2003, raised first capital in 2015. So, we did, we had customers pay us to do projects, right? So, we had paying customers. I ran 30 million in revenue through the company over those 12 years. And we use the profits from that to build the tech. And so, we were like 30% net margin, and I invested all of that money. You know, we’ve spent about 8 to $9 million building the tech, that funded it. And we were breakeven that whole time. And then when the world was ready, the AI hype wave started in like 2014, 15, then I started raising capital. We had already proven that the product works for customers and then we, you know, were off and running at that point.

 

Did Daisy Start Out as a Consulting Based Service?

 

Eric:

Got it. In the very beginning, correct me if I’m wrong here, so you’re building the product, it’s not working quite yet. Were you bringing in, was it like service-based revenue, consulting-based revenue, and then you eventually moved it into, kind of, more pure play SaaS?

 

Gary:

Yeah. It was consulting services revenue purely for like many years. And then we stopped doing, then we became 100% MRR in 2015. And we, I had, I had a bit of headhunting to pay the bills. And I sold the headhunting business. You know, it was really just generate profits to build the tech. That was the goal. And then the world, when the world was ready, then I went and raised capital.

 

What is Gary’s Favourite Business Tool?

 

Eric:

Got it. Awesome. All right. Well, Gary, working towards wrapping up here. What is your favorite business tool not called Daisy intelligence?

 

Gary:

Now my favorite tool. I mean, I love our finance tools. I love looking at financial reports, QuickBooks. And I like Salesforce, looking at my customer funnel. Like those things give me comfort that the business is going in the right direction. So, daily cash flow and Salesforce, those are two key things.

 

Eric:

Yeah. You know, not enough entrepreneurs look at the daily cash flow statement. It, it’s, it’s weird to me but—

 

Gary:

I built a cash flow model that’s projected for a year at the daily level. And I look at it —

 

Eric:

Yeah.

 

Gary:

That way I could start to see three months out the red flags and —

 

Eric:

Yeah.

 

Gary:

Cash is king. If you can’t manage cash, you’re, you’re gonna die, right?

 

What Books Would Gary Recommend?

 

Eric:

Yeah. 100%. Man, you can totally sell that as a SaaS too, I would pay for it. Now, what is one must read book you’d recommend to everyone?

 

Gary:

I like the Patrick Lencioni books, The Five Dysfunctions of Team, Lead advantage. And then the Jim Collins books, Built to Last, Good to Great. Those are awesome books.

 

Eric:

You know the, one of Patrick’s books, The Ideal Team Player, that’s a really great book too.

 

Gary:

Yeah, I’ve read a bunch of his —

 

Eric:

Yeah.

 

Gary:

Great, great business books for leaders.

 

What Other Kinds of Resources Does Gary Consume?

 

Eric:

Yeah, for sure. I guess, I’ll give you a bonus question here. Just because I’m curious, because you’ve got this engineering mindset. What other resources are you constantly consuming that you’d recommend? Could be someone you follow on Twitter, it could be a newsletter you pay for.

 

Gary:

I search Google and I read, like, academic papers, and I read business books. Like there’s two sides of me, there’s the leadership culture side that I spent a lot of time reading about, and then there’s the, the tech side. And I just read, like, all the open courseware on universities these days is like, you know, not to denigrate conferences, but when you have like graduate degrees from university, and you’re a stem graduate, and most of the people in my company are, it’s like, you know, go read a textbook or academic book. So, Google is amazing what you can find out there, and how much open, open academic source material there is. So, I, kind of, read that. I’m a bit of an odd duck that way, so.

 

How Does Daisy Attract Talented Individuals?

 

Eric:

No, I think a lot of people do that. It’s amazing. I have another bonus question, I lied. I’m just, I’m just curious, because it, you just mentioned a lot of your people are, you know, they’re stem graduates, right? How have you set it up where you have really smart, talented people? How do you get all these talented people?

 

Gary:

I think it’s the vision. Like for us, we’re one of the very few companies that have productized AI, and we say: your mission here is to create the future of AI and business. And then we’re a small company. So, the code you write today, we deploy it into production tomorrow, and you can see the impact on our customers. So, you know, when you work for large tech companies, you kind of get lost, and then you don’t really see the impact of your work. So, people who want to write AI code, I don’t use open source, we don’t use TensorFlow. We don’t use it, we write all of our own code. And if you want to do that, and you want to write the future, and see its impact, then we’re the place for you, right?

 

Conclusion

 

Eric:

Impact and vision, that’s motivating. Alright, Gary, well, this has been great. What’s the best way for people to find you online?

 

Gary:

Yeah. You can look at my LinkedIn profile. I have a unique last name. So, you can find me, Gary Saarenvirta. Look at our website, www.daisyintelligence.com, you’ll see my email address there. My LinkedIn has my email address. If you liked what I said, just say, reach out, and put a little moniker, and say: ‘hey, heard you talking on Eric’s Level Up podcast and, you know, this would be great,’ then I’ll connect with you. But if you just send me an introduced request, I typically decline those.

 

Eric:

Yeah. All right. Gary, thanks so much for doing this.

 

Gary:

Thanks. Appreciate it, it was great.

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