Sayari CEO Farley Mesko - Mapping Global Financial Crime

0:00 I am convinced that nobody knows even on the crypto side or on the traditional side you know the the actual volume of money that is that is laundered globally every year hello data nerds my guest today is Farley mesco Farley is the CEO and co-founder of sari a financial intelligence and supply chain risk platform prior to founding sari he was the COO of the center for advanced studies a national security research organization for welcome to World of

0:30 death thanks Lauren great to be here I'm very excited now the last few years have brought like massive changes and especially in like the global supply chain what are you seeing from kind of your unique perspective yeah so some really big thematic Trends driving demand for transparency right um transparency both in the financial Network side of things which is part of our business and um in Supply chains as well and obviously I see those two

1:00 things as as fundamentally uh related I think if I had to map back to kind of one big thing that's driving most of this um from my perspective from our perspective I would definitely point to the strained geopolitical environment um and strain like is it is it us China and we have to understand like the seventh layer down like Supply lar to something or yeah I mean it's

1:32 everything from trade tensions with China as you point out um to the you know Western efforts to sort restrict the flow of technology and finance to Russia for their war in Europe yeah conflict in the Middle East um everything kind of maps back everything we're seeing in the market kind of maps back to this strained geopolitical environment so that's the one big thing and then kind of as you think about how it you know trickles down from there um

2:01 you look at sort of the KnockOn effects you know because China example that you mentioned that seventh player supplier that manufacturing capability the financial flows that has to go somewhere as we think about sort strategic decoupling from these geographies or whatever that has to go somewhere so I think what we're seeing um you know from from our perspective our clients um is a is a very pronounced fragmentation our

2:32 clients are very much accelerating um the pace at which they diversify their supplier base away from these traditional centers of gravity what happens like I mean like I could see a lot of scenarios where okay something was being manufactured in China and now it's still being like 98% manufactured in China but it's like 2% finished in Vietnam and now it's like it's got the Vietnam label on it like I menag these are just like incredibly hard to track they're they're very uh

3:04 very very difficult to track um I there's you know probably all kinds of enforcement and policy related things we could talk about in terms of what the Customs authorities have to do in terms of looking at Value at across the supply chain and tracing individual components different techniques Technologies for uh looking at you know literally down to the DNA profile of where materials came from yeah I mean there's a lot of incentive to lie all across the chain

3:27 though right for sure yeah from a tariff perspective absolutely I think um but from from our perspective and what makes things interesting to us as a data company um talking about Das is you you have this you have this fragmentation and you have this um you know the shifting of capacity into called southeast Asia or Latin America Middle East Central Asia even in some instances and in some ways that's great

3:59 because it's not China and in other ways though it it begs the question just because it's not China does it necessarily mean that that's safer yeah um and that could be what you're talking about it could be you know uh sort of this this minimal value add and kind of using ter by I mean more diversity probably does mean safer so if you're getting it from 13 countries rather than two it's probably more likely you have some redundancy

4:27 there right as long as it's not like all coming from like really the same Source I I think it um yeah I think it uh it definitely makes things more resilient it also definitely makes things more complex that's right um and I think that complexity um those open questions about transparency in some of the places where you do see this you know capacity kind of tailing into um pair that with a more

4:58 engaged consumer uh and a more active sort of regulatory Community putting pressure on you know uh we'll talk I'm sure about sanctions and trade you know policy here trade restrictions OB the more certainly the more active regulator but then also the more demanding consumer putting pressure directly on Brands it does create uh a pretty gnarly risking compliance uh environment and how does it work like going the other way like you if you think of all these relatively new

5:27 sanctions on on Russia um I've seen all these great stats where it's like the French exports to Russia have gone down by y dollars and the French exports to Armenia Kazakhstan Georgia Etc have gone up by that exact same why and so clearly they're just like moving it and maybe marking it up probably hurts Russia a bit because they have to pay an extra 15% or something for those same Goods but they're clearly like still moving to

5:53 the to the to the end Source yeah yeah yeah I mean it's um I think that so if you kind of think back over the last couple decades um we're all familiar with the rise of sanctions as a policy tool um you know there there's been sort of a proliferation of lists and everything else and but I think that it some point

6:24 there's a there's a realization that you can't put everything on a list like you can't you know you cannot keep up with naming the individual companies in Armenia or Georgia corre create new companies every hour it's it's crazy and so I think um one of the things that we've noticed and this is also very interesting for us as a Das company is um you know everything that we just talked about has kind of manifested

6:56 itself in I would say um policy makers utilizing more narrative based restrictions narrative based sanctions um and policies rather than list based and so government basically tells you there's all kinds of people in companies that you can't do business with they fit this you know the parameters of this narrative policy that we've that we've put together um you know for all kinds of reasons you can't do business with them but we're not

7:27 going to tell you who they are yeah and you know it's one thing to kind of go to Industry and say okay well this guy's you know a terrorist he's isol you know put him on a list screen Forum Etc um it's quite another thing to say you know we're going to come up with restrictions around an entire section of the Russian economy or an entire region in China or an entire set of goods and you know um

7:55 components uh you know that could be used in dual use Tech Technologies and put restrictions on that there's no list to screen against and Industry kind of has to figure out how to do that again this question of how do you green in a non-list based world is a very interesting question as a data company is something that you could sort of um sum up our business in a nutshell and even in a list Bas world it's super

8:22 hard because you have the I mean speaking of Russia you have these like companies that are like Russian dolls going through right and they have like nested llc's even even if the LLCs are all based in Delaware which they're often all over the world but even that Delaware llc's are just are incredibly hard to to to penetrate in fact sometimes they're the hardest ones to penetrate right um and so you have all these different kind of entity swapping

8:48 and stuff like there no one no one's got a simple even Microsoft doesn't have like a simple corporate structure nowadays even they have so it's like common to have these nested LLC so doesn't NE necessarily say you're a bad actor if you have them um and so especially overseas when like they they have their own reasons to have nested because they're trying to evade their own government sanctions their own government taxes or something like that right they're usually yeah some kind of

9:15 thing so how do you deal with all that stuff yeah it's funny I we um we used to keep track of the craziest corporate structures we've ever seen I can't remember I remember was like 12 or 13 or 14 layers of ownership that we kind of able to map out on one of the moves just you know really sprawling stuff um I think uh yeah there's um there's probably a broader point to make here which is just that whether

9:44 we're talking about this phenomenon of um you know company structures uh you know or um you know money laundering topologies or whatever the the most um capable of the elicit actors are not going to stand out right I mean they know enough to know to to not stand out and so I think again and but but even also kind of what you're talking about where it's like we have maybe something is sanctioned but maybe it owns something

10:14 that's you know not on a list and how do you that I mean it all falls back into that category of the narrative right you know the treasury says you can't do business with these people if their own this percent or control this in the EU you know and how do you screen for that and so for us again we can pretty easily take a a narrative sanction a description or a trade policy a trade restriction and

10:39 we've collected this massive Hy stack of data right company data and trade data you know individuals tied to those companies and shipments and we can basically slice it and dice it based on those parameters and effectively create lists where they don't otherwise exist and that's kind of you know our business in a nutshell and and it's great because industry has spent the last two decades focused on optimizing the process of comparing I mean to your point even

11:10 screening itself is not a solved problem but you know you spent decades optimizing for take this list from the government and match it against my list of customers or the declared end users of this thing I'm shipping or whatever and make sure there's no intersection and so then what do you do when that doesn't exist and that's kind of where we come in and and in one thing for to do that in like manufacturing it seems like in Next Level more difficult

11:41 to do that for Commodities um and a lot of these especially commodity Traders energy Traders Etc like they're well known for themsel also trying to Skirt the Rules and and kind of move things around and very few of them are based in the US for that reason because they don't want to be like completely under the US kind of thing they're usually in Switzerland or Dubai or Singapore some other type of place um Hong Kong um how how does one

12:10 like deal with those types of entities well I mean I think the um I think there's a few things to say there one is that the certainly the sophistication of sanctions evasion Financial crime um and trade related uh you know illicit activity the this the maturity uh and complexity of those schemes has

12:42 increased um there is both a uh professionalization in the sense that the illicit actors are becoming more professional and also a professionalization in the they are getting more support from professionals yes and that is uh those are two different things I think politically again to come back to my previous example it's all well and good to say okay this you know this guy's a

13:12 member of iso let's put him on a list the world can pretty much agree on that you know with some exceptions but can pretty much agree on that it's quite another thing to say well here's a you know a sector of someone's economy um or a commodity you know coming from this geography that should be restricted um and then kind of you know going and trying to enforce that I mean it it in some ways is

13:39 um uh it puts you in a very difficult position as a multinational business who's trying to uh you know I think the framing maybe that you made was a little bit more Insidious but it could very well just be that some a multinational broker Trader whatever is just trying to figure out you know if I have a sanction from the US over here that says I can't do this thing and then a policy over here from China that says if you do this

14:06 thing you will get sanctioned you know right how do you navigate that yeah exactly they have competing interests yeah and and with and and you historically a lot of this the the money flows have flowed through US Banks um that is potentially starting to change I'd love to get your thoughts of like how the money flows are changing if you're enjoying this podcast please sign up for our newsletter go to world of.com the link is in the description

14:38 below now back to the video I will say that I've been doing I mean I haven't doing this as long as some people have but you know 15 years or so and I've heard this about the demise of the US dollar before um you know it it I can't say it feels super different this time around so I'm skeptical that um I'm skeptical that you know a significant uh

15:09 that the Primacy of the US dollar is really still you could still trade in dollars and still do bilateral though not go through US bank right and you could you could you could have ledgers on both sides or you could um uh you know you could tra you could have tether or crypto or some other type of thing too which is dollar denominate there's probably other ways of still because the dollar does seem like a safe

15:32 way everyone kind of understands it around the world to trade doesn't mean you have to Route it through US Bank it it's true um uh I'll say a couple things there one on the if you look at I think it would be very difficult at least if you're talking about large scale uh kind of industrial grade money laundering um to avoid I don't say the us but at least

16:03 the Western Financial system yeah uh which sort of falls under the loose jurisdiction of of the US because of the you know the the correspond banking networks that are that that run through here I think that um whether you're talking about I mean even if you look at the um some of these doj indictments recently around uh the the Chinese kind of call Flying money or flying money service and it's tied you know sort of

16:34 tied with the crypto element to it as well you it's all it sounds very scary at the at the kind of headline level and you dig into it it's like Mast majority of the money is moved through more traditional you know trade-based money laundering um topologies and you know again if you're trying to access consumer Market here in the US for drugs or whatever it is it's gonna be very very hard to avoid that again that sort

17:05 of us influenced Western Financial system and it's it's Al it's really interesting because on the the Chinese money laundering you have one side where you have like all these Chinese people around the world who are laundering money to avoid China um because they're trying to get money out of China they're trying to move money around they're trying to they're trying to move money in a way for the Chinese government not to see it and they've gotten so good at

17:27 it that they're really good at money laundering for everybody right because then they can also figure out all ways that the U if China can't say maybe the US can't say so like these these Chinese moneyy laundering folks have gotten like become this like the Goldman Sachs of money laundering to because they're helping all these Chinese expats um you you could see all these like weird like things happening from once and maybe we benefit from Chinese laundering money

17:52 out of China but then we also get hurt by by the opposite that's right that's right yeah I I me I'm certainly not an expert on uh on on that but um but yeah it uh it's one thing to sort of cheer from the sidelines when uh you know Financial flows are coming out of China but you have to think about what kind of infrastructure is being created to do that and how well be repurposed yeah

18:15 exactly so from your standpoint you don't see like crypto yet being like because it's still very very tiny percentage of all the money flows yeah and similar um caveats here you know I'm not a uh I'm not a a crypto uh expert I mean I can certainly share my perspective I think that um you you you alluded to this first and foremost Nobody Knows the scale of the

18:46 problem of money laundering globally people argue about it all the time go on LinkedIn right you know yeah uh a new you know chainalysis state of the market or whatever report comes out or a new IMF study comes out and everybody's sort of you know um talking about what percentage of crypto transactions are illicit how does that compare to the traditional Financial system and if it's not clear I am convinced that nobody knows even on the crypto side or on the

19:15 traditional side you know the the actual volume of money that is that is laundered globally every year um I think that uh regardless of that the um Ratio or the percentage is s of absolute terms there's there can't be any comparison between the yeah I mean we're talking probably trillions in the um in the uh normal money movement and maybe billions in the

19:46 crypto Movement we we used to in this is very very early days s stuff but when we were pitching in our early um some of our early pitch materials we had a because we would get this question time was like 2015 is everybody was really you know uh getting really excited about crypto and thinking about uh oh like what could happen money laundering whatever and so we would get this question from investors all the time and

20:10 we had this graphic of the estimated amount of money that was laundered through crypto um kind of on the it was it was a bar graph and on one side it was crypto and was like hundreds of millions of dollars something like that and then you know going like the other side all way up and then onto the next slide a bar and then onto the next Slide the next bar onto the next slide and then the top

20:35 of the bar like six slides later is the volume of money wandered through the traditional Financial system yeah totally I mean the crypto is not even it's not even one day probably worth of the laundering for crypto for a years not even one day yet for all the others La now I will say though um it so first it doesn't mean that we shouldn't yeah tackle both right I mean both are important um I just think we you know still have a

21:02 ton of work to do in Our Kind ability to stop dirty money through more traditional channels but you know for me crypto never struck me as a super logical or efficient way to move right there's a record there's like tons of money yeah if you kind of put yourself in the shoes of a I don't know like a professional cartel launderer I would have to imagine that just thinking about shipping you know containers of bulk

21:32 recycled cell phones or something like that that has no market value kind of make up whatever value you want and ship that and someone can buy it for something else you know some other amount of money and the difference can kind of be the transfer of value like that is to me one of the only reliable ways of actually moving um transferring that much value I think for crypto there there's probably um use cases of sort of uh small volume

22:02 high value uh um fenal precursors kind of comes to mind right like something that is that you don't need it's not talking you know billions and billions and billions of dollars at a time or millions and tens of millions at a time um so I think that is um I think there are definitely I would I would hesitate to even call them edge cases because they're they're well defined use cases that we have to worry about um but I do

22:27 think even in as I said a second ago even in situations like that you you look deep enough you'll probably still find some Alliance on the traditional Financial system one of the problems is from for many jurisdictions around the world um if you if you just think of kind of like Emerging Markets world like almost 100% of companies are doing some sort of money Laing because they have to from their own government they they often have two sets of books um my guess

22:51 is like every company Russia has always had two sets of books but that's probably true of like many many many countries um that are out there um because they they're they're trying to avoid their own government um their own government may have like certain owner things or that maybe that's more of an accepted practice there uh and so like you know money laundering becomes like the norm for for many many many companies maybe even the majority of

23:15 companies around the world have to engage in it um and so then then it's like okay well what level of money laundering are we willing to accept to to go through right yeah kind of back to the um uh offing prop that we just discussed in the context of China yeah I I don't know I mean um for that reason and other reasons um it can be very difficult to collect data

23:47 and get transparency in um in places like that you know we're talking about Russia China Etc um I will say also though that um one we one of the things one of the ways I often describe what we do is sort of arbitraging what people think is available publicly versus what is actually available publicly yeah um and and that's true of it's true many many things but in in many of these environments there is just far more

24:19 information available publicly if you if you know where to look and whether that's the legacy of Communism of a highly bureaucratic recordkeeping culture whatever it is um uh there is there is just a lot of that it's not necessarily easy to find you have to be prepared for you know um foreign language non machine readable you know semi structured unstructured data but um it does typically exist more so than the more so than people think

24:52 both in terms of the you know uh Regulators you know needing help and sort of where to look but also or compliance tees you know us helping them kind of open up that data so they can look at it but then also the people who are actually creating these shell companies or whatever in the first place I don't know that they fully realize that you know that record of that with that receipt sort of scanned and

25:16 attached to the back of it that says you know I'm Chapo's kid and I created this company and here's the receipt for where you know the money was which bank the money was paid out of you know scann right onto the document um that stuff does exist uh and it does exist at scale now partly to to kind of like you know you're you're you're doing this jigsaw partly to connect this jigsaw I imagine like entity resolution is going to be

25:43 like incredibly important like how do you think about entity resolution and assume in your case like the entity is like the corporate entity yeah so great uh supremely important topic um I would go so far as to say that one of the more important pivots uh quote unquote that we you know went through in our journey as a Das and SAS company was probably um you know three

26:15 or four years ago in you know we've been around for 10 years we spent the first few years of the business really focused on the data acquisition side of things just professionalizing that uh automating the processes for collecting and refreshing our data but a few years ago we sort of realized that at the end of the day we had to be an enity resolution company um because and I think this is true in almost any um data intensive business

26:48 but it at least part of and probably a significant part of your raw material inputs um are going to come from somebody else's data right and that's often you know commercially available maybe it's publicly available but the only data that you're going to 100% own you know is data that's generated on your platform and then you have all the you know questions about monetizing customer data and privacy implications and and all of that but if you rely on

27:23 to any significant degree on data that could be acquired publicly or commercially by someone else by a competitor of yours or somebody who with enough time and resources given you know again looking over not maybe not a one-year time Horizon but a fiveyear Time Horizon you know how do you um think about building that durable moat if you're necessarily dependent on other people's D this is a question we've spent ton of time um thinking

27:55 about and so one of the one of the best not the only way but one of certainly one of the best ways in my experience one of the best ways of creating that durable barrier to entry that mode is um to invest the time and the resources in both the business logic side of eny resolution and the infrastructure and scale side so being able to do this against really really large sets of data both of those things done well I think

28:21 can really um uh underpin a uh an entity resolution component to your stack that serves as a differentiator and and the goal there of course is um if even if you don't if even if you didn't originate the individual sort of components there if you can be the one who um does the best job of stitching those things together then you can create this derivative product a unique

28:51 derivative product on top of it and then at least you have sort two legs of the stool right the data itself is NE Neary um you know it it but not sufficient uh as a piece of the moat um but then kind of the secret sauce of how you join things together um the business logic any AI way or you put on top of that you know the scale and the processing side of things that I mentioned um that gives

29:15 you you know a much better Foundation to build on um I assume in any resolution in your case like the false positive is way worse than the false negative or or would I be wrong about that so uh you're you're you're absolutely right and and and again it's this is sort of what I was getting at when um or it's one example of what I was getting I was talking about invest the time and the resources to build business logic and

29:43 train models and you know build infrastructure that works for you because you're going to know your data better than anybody else right um and so in our case yes a false positive is worse than a false negative and so we bias our our resolution models you know a little bit more on the conservative side and AI is getting better and better at like providing tools to help on that so I imagine a lot of things you may

30:05 have done eight years ago is no longer Advanced today right because like there's certain things and how do you deal with that kind of world changing yeah it um it is very much changing let me say one actually one other thing on the enity resolution subject specifically though because I think this is actually super important um I uh so I've always thought of and this is true whether you use a rules based approach or a you know an AI driven

30:36 approach or some combination of both which you know kind of spoiler alert that's that's that's where I would say the the world is going or certainly where we're going um but the and resolution in addition to all everything I just said about you know creating that mode it also gives you a um good and your resolution you create a network effect in your data so obviously your data Holdings get more valuable as you add more data like that's that's

31:05 definitional but done well adding new data then also because it increases the connectivity of kind of the previous data sets that you had it it it increases the value of each of your old data sets every new data set that you add and so that that um that Network effect is very powerful and if you then as I mentioned a second ago if you professionalize the process of you know I don't want to say sort of the

31:36 assembly line because it sounds pejorative but the the the process of really getting uh uh um new data sets on board at ETL fast right um you create that really nice flywheel effect um just adding new value or adding new data value increases and you know being able to throw around work like why Network ass asking asking questions across data sets makes the data like each data set

32:08 way more valuable right because you can ask more deeper and deeper and deeper questions any one data set is going to be actually really not that useful at all by itself uh totally and it's it's really when you're combining many and that's that's a problem also even evaluating how valuable the data set is because you're like well if you evaluate in a back in a vacuum may think it's not valuable but then when combined with these other four may actually like

32:31 massively increase the other Four's value yeah think about the example that you talked about early uh on a few minutes ago you know seven layers deep of suppliers across you know presumably seven different company uh countries excuse me um you know trailing back into China um you know that is a DAT that is an import data set from the US uh you know and maybe a corporate record data set to show you know who that who owns

33:00 the company here and you know trans shipment data from uh you know Ecuador and value ad you know data that was added in whatever Vietnam tracing back to a manufacturer in China which is a Chinese import export data set but then who owns that manufacturer is a six data set and then going on back to the Russian doll the and you're back to the Russian doll data yeah um so yes every so again I think the point just is

33:25 though is that if you break any Link in that chain you you really really diminish the value and so the flip side is as you continue to add data the ER gives you the ability to to unlock more value and how do you think of like temporal data because this time based data can like add a ton of value as well yeah so temporal data um in general I think that temporal data is more valuable than non certainly like the

33:55 price of temporal that is way more expensive yeah I would say let um maybe two things to say there one is that um um if again if you are sourcing any part of your raw material as we talked about a second ago from places where other people could get it um as we just discussed you really need to think about your Mo right and

34:25 temporal data to the extent it is ephemeral um meaning that it disappears once something changes and there's no natural um change log in the native wherever you natively sourced that yeah that that can be very valuable yeah because you need the history so if you're the only one with the history if the you know if uh uh whatever like I was saying before to back to my example of like the isil right ter designated terrorist if that

34:55 person you know uh got designated by the US Treasury and then the next day you know resigned from their five companies yeah um but that native registry had no record once the change there was no change log rate and so that just disappeared Into The Ether if you were the only one that had that that would be tremendously valuable there is a halflife to that data right it is it is the value of that data I mean it is

35:20 definitionally historical backward looking um so not sufficient again to think strategically but but that P that aspect of temporal data is definitely very B I think the second thing though that I would say on the subject of temporal data um there's kind of a uh um so as a Das company and particularly in the reg Tech risk Tech space we sort of see a few different variants of this

35:51 temporal data trap um on the one end of the spectrum is kind of the uh um the kind of the one-time value and so you have so many every every risk and compliance work I just say every but most risk and compliance workflows to some degree have some kind of screening step where you have to evaluate a large population for risk and then you find some things and then you triage that and then you look into some stuff and then

36:20 you whatever and so but it a lot of it starts from that screening bit and so many companies fall on this trap of building a product that delivers a lot of onetime value um but then it sort of you sort of get the customer gets diminishing returns once that initial kind of screen is complete and um so if you're not thinking about that kind of sort of a reframing of the temporal aspect to data but if you're not thinking about that

36:45 ongoing value there's a there's a we've seen you know multiple times countless times of SAS companies fall into that sort of trap but then the other side this is also something that you know we have the scars to uh uh to attest to here but there's there's a there is a there's a different trap on the other end of the spectrum it sort of one time is on one end I think real time is quote unquote is on the other side of the

37:14 spectrum um just because most entities are not can't don't have the capabilities of ingesting it or just because most you know this is not true of all use cases right I I just it my point is really you need to know your use case and you need to know how real time you need to be right because most companies aren't changing daily right most use cases do not require real

37:45 time um real time data and I think you know that so that temporal High Velocity data is definitely inherently more valuable it's inherently better at delivering the ongoing value that we talked about it's changing all the time um but it's only true up to a point for the vast majority use case I think there's a point of diminishing returns where if you strive for real time you you really need to make sure that the use case actually demands that because

38:16 real time is very hard and it's it any the faster you go the harder it is right um and that was I think something that we that we learned um you know our we have our like our sanctions data flows in every 24 hours that's probably the highest velocity data that we have um but our trade data I mean our trade the sanctions data is comparatively tiny compared to our overall Holdings there's 20,000 things maybe 50,000 things

38:44 against you know billions um but trade data you know that's hundreds of millions of transactions that that's that's like in every two to four weeks umate that data yeah and again resolution work you're able to create more value and historical data etc etc and so we're able to monetize that you know offer a monitoring capability that's tied to kind of this like every FWE Cadence you know and we have we have great retention right and so I guess

39:12 it's just a point of temporal data is definitely more valuable but there is a point of um diminishing returns there now I I love your advice so so so many companies they're selling into they trying to sell into National Security and they run into this issue where you know there's all these they get all these like additional requirements that they have to do and from like the the the the product manager or the CEO kind of who might be like the product

39:40 manager's perspective like these requirements add massive costs and then they often degrade the product to make the product worse not better um and they feel bad about charging the government more they don't want to have to they're Patriot they don't want to charge the government more and they also feel bad about offering them a worse product than they give to other people um you know I don't know if that's a legitimate criticism but how how would you allay

40:03 the fears of some of these folks that are uh kind of working with government National Security world oh I I don't know if I'm actually the best person to allay your toay your fears again scars to uh scars to prove it I think that um what would I say here in the uh if you're going to if you're going to pursue work for the government um just know what you're getting into yeah I think that you're

40:36 you know you're not going to be able to run a typical sass Playbook um you know you you it takes months of paperwork even to set up a free trial right there's no yeah you can't give things to the government for free right totally um you know it takes it took us really I mean we have a lot of government business it took us a while

41:06 to figure out how to run a as close as we could approximate to a SAS or D playbook in the government um I think that you know you need to so you just need to know that the traditional Playbook won't necessarily work um it takes time there's no hack there's no shortcut I mean look you can you can do the accelerators you can do the sbir programs you can do there's there's the government is objectively getting better

41:34 at working with startups than it used to be um but at the end of the day you're G to move at government speed yeah and you're gonna have to do what the government asks you to do and you know I think that over time you build up enough of a customer base um and if you're intentional about how you work your way into analytical exchanges and briefings and for a hill

42:06 and whatever um you build up enough brand awareness that you know uh people will trust that people will trust you when you say I you're telling me you want to do this but uh what it sounds like you want to do is this and here's a better way to accomplish what it is you're you're trying to do but that simple process of requirement solicitation and and iteration is very very difficult in government and it's

42:36 even difficult if you go as I said through the accelerators through any of the sbir work or or any of those those early stag issues for government because you're going to be building you're going to be intermediated by some kind of a program staff you know at whatever accelerator or group that you're working with they're going to be intermediated by the R&D folks who own the budget where the agency support to that R&D to that

43:06 accelerator goes and then they're intermediating the actual end user who's sitting somewhere in a skiff or is for deployed or whatever who can't talk to you and so that requirements game that game of telephone of the requirements is incredibly difficult and timec consuming way to build software and it just takes there's again again as I said there's no hacks it just takes a lot of uh now you you guys brought on tbg as a growth partner about a year ago and

43:35 they took a big piece of the company in some ways was like a partial exit was kind of like a somewhat unique kind of like how did that like manifest itself how do you how do you think through that yeah um it it's it's a it's been a really great partnership I mean we'll be uh we'll be effectively a year since um signing uh next month which is hard to believe um there were a few reasons that

44:04 we wanted to transact at all and then I think why we wanted to do in our case was a majority recapitalization you said kind of partial exit um we I think you could probably bucket those into two or three different categories on the sort of factors inter internal to the company side of things um I think there was a pretty strong sense that you know we we'd been at it for at that point eight and a half years

44:33 something like that assume you had some shareholders that were like hey I would love to get a return on my investment totally yeah yeah totally I no I mean absolutely I mean as a CEO being able to return Capital to shareholders and get liquidity for yourself and your early employees and all your employees um you know so thread that needle between kind of returning value to the employees and the shareholders who you got you to where you are but then also preserving

45:00 that upside for the next transaction that is a really nice needle to thread again as a as a CEO but but for us like the reason we did it um as I said we've been at it for eight and a half years and I think there was a realization among you know our our leadership team that if we really wanted to set the company up to continue to grow at the you know very fast clip that we've been

45:26 growing and you know do that in the future and really get to the next level um there needed to be a general sort of upleveling of the organizational maturity um and you weren't we weren't going to do that on our own we weren't going to do that with some kind of external accountability I think different companies are tack this in different ways right but for us um you kind of know what needs to happen you know there's more strategic work you

45:55 need to do you know you need to rethink you kind of package and price your products in the market and you there's all these big strategic things that you kind of know you need to do but if no one's there sort of making sure that you do them it is very very hard to self motivate your way and things are going well too right it's just very uh hard to self motivate your way through that um

46:19 and you're so operational you're thinking a year out a year and a half out two Max maybe but there's nobody saying like what is the fiveyear strategy and what and and what does the org chart need to look like in four years and and you know at each quarterly Milestone to get from there like how do we really think long term about this business it just it's it feels totally handwavy when you're in kind of startup

46:46 operational mode because you're just so focused on the next year or so so we really needed somebody to kind push push us to do that and it's been awesome I mean our team is our team is really stepped up I mean I think it's made us all better Executives which is great and and just as a company you know more organizationally mature um but then I think the other the other big reason we did this was just we you know if you

47:13 look at the Dynamics of the market that we're in highly fragmented there you could count on probably a couple fingers the number of companies over 100 million in AR right or whatever arbitrary you know level gets the kind of like maturity right um you know we have the effects of all the 2021 money that you know propped up all these businesses reasonable valuations and everybody is still in this kind of L land grab mode highly competitive um you know propped up by VC

47:46 money and I think that that's fine except that with heavy competition comes a lot of price pressure um and you're going to see a start you know sort of a separation of um companies that have good union economics sustainable business model versus those that don't um and we really wanted to position ourselves as you know as an acquirer as a consolidator as the industry inevitably starts to consolidate so you

48:16 know for other uh CEOs who might be in our position or in my position in our company's position you know I I would just for any transaction but obviously something like this is very consequential um just know what you're trying to get out of it right like we we sort of had a pretty good idea of what we needed as a business in order to get to the next level and um we designed a a process to get us there now a few

48:45 personal questions um you are famous for having like a big movember style mustache 12 months out of the year not just in November um and you know that was like you know that was definitely big in like the 1850s but like do you think it's going to make a comeback like there's not that many mustached people anymore I'm I'm a one man one one man comeback yeah um I I

49:16 uh you know it was a total uh totally on a whim probably like 18 months ago I just was like I'm GNA do this and here we are and now now I feel like I can't I can't you can't do it it's like part of your brand now right I like I I shaved the other day you know probably a few weeks ago and and I forgot you know you know trim your lip the same way when

49:41 you're trying to grow a beard and it look so bad and I just it scared me and now I'm just locked into this I like it um what uh two more question we ask all of our guests what is a conspiracy theory that you believe uh uh there are so many that I want to believe I think that the um I am 100% all in on these UFO conspiracies okay that have bubbled up over the last

50:09 few years um I am yeah I am so energized that it's gone mainstream um it definitely feels like the dam is like was a year or two ago when the New York Times started writing about it which is like kind of crazy yeah I I will say I will say that know enough about how the government uh works now to um to know that a massive sophisticated coordinated cover up is probably not what's going on um but I do I do want to

50:43 believe that there's more of a story and somebody knows something somewhere okay I love that one um all right last question we ask all of our guests what conventional wisdom or advice do you think is generally bad advice h um so I think it's a stretch probably to say this is bad advice um but uh I think the thing that I tried and tried to live for a long

51:15 time was um hire good people and get out of their way so this you know this is sort of conventional wisdom you know in the in the in the Das and Sass world right I think that this can be good advice sometimes in some situations you know maybe if you're a super mature business with incredibly well- defined culture like Netflix or something um but I think like I don't know in general even with your most Senior Team

51:47 I don't know I in my experience the best people that I've worked with want to be sort of both LED in the sense of you know hiring people get out of their way but also so managed right like they want to know sure how they're doing they want to feel like they have a constant finger on the pulse of what you're thinking and overall company strategy and how that's evolving they want your input on decisions it's not sink or swim right

52:11 you know they want to know you know and get constantly sort of uh you know reminded of how what they're doing is contributing to the you know to that overall kind of company strategy and how they can corrected need be so I I don't know I think of course like as the company gets bigger you have to push more decision- making down on um you know on the team and um but I think and this is probably where a lot

52:40 of this is is sort of user error rather than this is like generally bad advice but I think that so many people kind of internal like hear people talking about this concept hire good people other way and they sort of internalize that and sort of abdicate the responsibility of management when comes to the senior team and I think they probably do that well part of the problem is like if you have like skip if you have like if you have

53:03 many layers in a company well then like everyone's hiring good quote unquote good people and and then getting out of the way then it's hard to inspect like okay how good are the people are they hiring how like what what's going on and so it could like it could be many layers where people don't really know what's going on there you better have really good leading indicator kpis uh because it can't just be oh you know you you were responsible for

53:29 this thing I hired you and I got out of your way and it didn't work because that's that doesn't help you at all so yeah I don't know that's my yeah and the more people you have the harder like then it becomes the harder it is to kind of do that in a way where like if you could design a company to have fewer people or maybe you design the company to have fewer layers like Jensen Wong

53:48 you know has like 40 directs or something so he has very few layers in in a company of that size yep yeah for sure again if you are incredibly thoughtful intentional and probably a pretty mature business with really good leing indicator kpis then yes maybe I could be convinced that this is this really good advice but in my experience it hasn't yeah no I'm with you like if you're changing anything you got you kind have to be in it um to do it all

54:16 right this has been awesome thank you Farley mesco for joining us we're all Adas I follow you on LinkedIn um and definitely encourage our listeners to engage with you this has been a ton of fun super interesting yeah well no thank you or this is uh this has been great thank you again thanks for listening if you haven't already done so please subscribe to World of Das wherever you consume your podcast YouTube Apple Spotify and more and please help us get discovered

54:42 by leaving a review and check out worldof dash.com that's worldof Das da.com and of course connect with me on Twitter or that's aen would absolutely love to hear from you