Sayari CEO Farley Mesko

Auren Hoffman (00:00.731) Hello, data nerds. guest today is Farley Mesko. Farley is the CEO and co-founder of Sayari, a financial intelligence and supply chain risk platform. Prior to founding Sayari, he was the COO of the Center for Advanced Studies, a national security research organization. Farley, welcome to World of Deaths. I'm very excited. Now the last few years have brought like massive changes in, especially in like the global supply chain. What are you seeing from kind of your unique perspective?

Farley (00:19.237) Thanks, Auren. Good to see you.

Farley (00:30.697) Yeah. So some really big thematic trends driving demand for transparency, Transparency, both in the financial network side of things, which is part of our business and in supply chains as well. And obviously I see those two things as fundamentally related. I think if I had to map back to kind of one big thing that's driving most of this,

From my perspective, from our perspective, I would definitely point to the strained geopolitical environment.

Auren Hoffman (01:10.321) like is it US China and we have to understand like the seventh layer down like supplier to something or?

Farley (01:13.088) Exit.

Farley (01:19.051) Yeah, I mean, it's everything from trade tensions with China, as you point out, to the Western efforts to restrict the flow of technology and finance to Russia for their war in Europe, the conflict in the Middle East. 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 trickles down from there,

you look at sort of the knock on effects, you know, because the China example that you mentioned, that seventh layer supplier, that manufacturing capability, the financial flows that has to go somewhere as we think about sort of strategic decoupling from these geographies or whatever that has to go somewhere. So what we're seeing, you know, from, from our perspective, our clients, is a, is a.

very pronounced fragmentation. Our clients are very much accelerating the pace at which they diversify their supplier base away from these traditional centers of gravity like China.

Auren Hoffman (02:30.053) What happens 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 imagine these things are just like incredibly hard to track.

Farley (02:46.431) Yeah.

They're very, very, very difficult to track. There's 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 add across the supply chain and tracing individual components, different techniques, technologies for looking at literally down to the DNA profile of where materials came from. For sure. Yeah. From a tariff perspective, absolutely.

Auren Hoffman (03:11.823) Yeah, I mean, there's a lot of incentive to lie all across the chain, right? Yeah.

Farley (03:19.081) But from our perspective and what makes things interesting to us as a data company, talking about DAS, is you have this fragmentation and you have this 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 because it's not China.

And in other ways though, it begs the question just because it's not China, does it necessarily mean that that's safer? And that could be what you're talking about. It could be, know, sort of this minimal value add and kind of using some terror invasion strategy.

Auren Hoffman (04:05.125) And by the way, 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 there, right? As long as it's not like all coming from like really the same source.

Farley (04:13.076) Hmm

it.

Farley (04:19.723) I think it definitely makes things more resilient. It also definitely makes things more complex. And I think that complexity, those open questions about transparency in some of the places where you do see this capacity kind of tailing into, pair that with a more engaged consumer.

Auren Hoffman (04:28.891) That's right.

Farley (04:48.039) And a more active sort of regulatory community putting pressure on, you know, we'll talk I'm sure about sanctions and trade policy here, trade restrictions. the more, certainly the more active regulator, but then also the more demanding consumer putting pressure directly on brands. does create a pretty gnarly risk and compliance environment.

Auren Hoffman (05:09.169) And how does it work like going the other way? Like if you think of all these relatively new sanctions on on Russia, 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 Y. 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 percent or something.

those same goods, but they're clearly like still moving to the end source.

Farley (05:38.08) Yeah.

Farley (05:43.167) Yeah. Yeah. I mean, it's, I think that, so if you kind of think back over the last couple of decades, we're all familiar with the rise of sanctions as a policy tool. you know, there, there's been sort of a proliferation of lists and everything else. And, but I think that it,

some point 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, wherever that are, it's just, it's, it's, it's crazy. And so I think, one of the things that we've noticed, and this is also very interesting for us as a DAS company is,

Auren Hoffman (06:22.097) Correct, because I create new companies every hour. Yeah.

Farley (06:39.263) You know, everything that we just talked about has kind of manifested itself in, would say, policymakers utilizing more narrative based restrictions, narrative based sanctions 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, you know, for all kinds of reasons, you can't do business with them. We're not going to tell you who they are. And, you know, it's one thing to kind of go to industry and say, okay, well, this guy is, know, a terrorist, he's ISIL, you know, put them on a list, screen for them, et cetera. it's quite another thing to say, you know, we're going to come up with restrictions around.

section of the Russian economy or an entire region in China or an entire set of goods and components that could be used in dual use technologies and put restrictions on that. There's no list to screen against. An 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 and something that you could sort of sum up our business in a nutshell.

Auren Hoffman (08:08.655) And even in a list-based world, it's super hard because you have the, speaking of Russia, have these like companies that are like Russian dolls going through, right? And they have like nested LLCs. Even if the LLCs are all based in Delaware, which they're often all over the world, but even that Delaware LLCs are just, are incredibly hard to penetrate. fact, sometimes they're the hardest ones to penetrate, right? And so you have all these different kind of entity swappings and stuff like that. No one's got a simple.

Farley (08:14.922) Yeah.

Thank

Farley (08:23.391) Yeah.

Auren Hoffman (08:38.385) Even Microsoft doesn't have like a simple corporate structure nowadays. even they have, so it's like common to have these nested LLCs. So doesn't necessarily say you're a bad actor if you have them. and so especially overseas when like they, they have their own reasons to have nested cause they're trying to evade their own government sanctions, their own government taxes or something like that. Right. They're usually some kind of thing. So how do you deal with all that stuff?

Farley (08:41.663) Yeah.

Farley (08:50.379) Yep.

Farley (08:59.701) Yeah.

Farley (09:05.739) Yeah, it's funny. We used to keep track of the craziest corporate structures we've ever seen. can't remember. I can't if it was like 12 or 13 or 14 layers of ownership that we were kind of able to map out on one of the mirrors. just really sprawling stuff. I think, yeah, there's probably a broader point to make here, which is just that whether we're talking about this phenomenon of

Auren Hoffman (09:18.939) Yeah.

Farley (09:35.307) you know, company structures, you know, know, money laundering topologies or whatever. The most, capable of the illicit actors are not going to stand out, right? I mean, they know enough to know, to not stand out. so,

I think again, but even also kind of what you're talking about where it's like, have maybe something is sanctioned, but maybe it owns something that's not on a list. how do you, 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 they're own this percent or control this and the EU, you know, and how do you screen for that? so for us, again, we can pretty easily take a

a narrative sanction, a description or a trade policy, a trade restriction. And we've collected this massive haystack of data, Company data and trade data, 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 it's great because industry has spent the last

two decades focused on optimizing the process of comparing. mean, to your point, even screening itself is not a solved problem, but you you spend 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

Auren Hoffman (11:11.781) Yep.

Auren Hoffman (11:23.427) And, and in one thing for it to do that in like manufacturing, seems like a next level more difficult to do that for commodities. and a lot of these, especially commodity traders, energy traders, et cetera, like they're well known for themself also trying to skirt the rules and, kind of move things around. Very few of them are based in the U S for that reason, because they don't want to be completely under the U S kind of thing. They're usually in Switzerland or Dubai or.

Singapore, other type of place, Hong Kong. How does one deal with those types of entities?

Farley (12:01.973) Well, I mean, think there's a few things to say there. One is that certainly the sophistication of sanctions evasion, financial crime, and trade-related illicit activity, the maturity and complexity of those schemes has increased.

There is both a professionalization in the sense that the illicit actors are becoming more professional and also a professionalization in that they are getting more support from professionals. And that is, those are two different things. think politically, again, to come back to my previous example, it's all well and good to say, okay, this guy's a member of ISIL. Let's put him on

Auren Hoffman (12:48.944) Yes.

Farley (13:01.547) list, the world can pretty much agree on that, with some exceptions, but can pretty much agree on that. It's quite another thing to say, well, here's a sector of someone's economy or a commodity coming from this geography that should be restricted. And then kind of going and trying to enforce that, mean, in some ways, it puts in a very difficult...

position as a multinational business who's trying to, I think the framing maybe that you made was a little bit more insidious, but it could very well just be that a multinational broker, trader, whatever, is just trying to figure out 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 thing, you will get sanctioned, how do you navigate that?

Auren Hoffman (13:40.016) That's right.

Auren Hoffman (13:58.265) Right. Yeah, exactly. They have competing interests. And historically, a lot of the money flows have flowed through US banks. That is potentially starting to change. I'd love to get your thoughts of how the money flows are changing.

Farley (14:18.399) Yeah, yeah, I am. I will say that. I've been 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 U.S. dollar before. You know, it I can't say it feels super different this time around, so I'm skeptical that.

I'm skeptical that, you know, a significant, that the primacy of the US dollar is really under threat right now.

Auren Hoffman (14:52.399) Yeah, you could 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 you know, you could trade you could have tether or crypto or some other type of thing too, which is dollar denominated. There's probably other ways of still because the dollar does seem like a safe way. Everyone kind of understands it around the world to trade doesn't mean you have to route it through US Bank.

Farley (15:00.203) Fair.

Farley (15:16.032) Yeah.

Farley (15:19.883) It's true. I'll say a couple things there. on the, if you look at, I think it would be very difficult, at least if you're talking about large scale, kind of industrial grade money laundering, to avoid, I don't say the US, but at least the Western financial system, which sort of falls under the

loose jurisdiction of the US because of correspondent banking networks that run through here. think that whether you're talking about, I mean, even if you look at some of these DOJ indictments recently around the Chinese, we call it flying money or something, the flying money service, and it's tied with crypto.

element to it as well. It sounds very scary at the headline level and you dig into it and it's like, wow, the vast majority of the money is moved through more traditional trade-based money laundering topologies. again, if you're trying to access the consumer market here in the US for your drugs or whatever it is, it's going to be very, very hard to avoid that.

Again, that sort of US influenced Western financial system.

Auren Hoffman (16:50.799) And it's really interesting because the Chinese money laundering, have one side where you have like all these Chinese people around the world who are laundering money to avoid China because they're trying to get money out of China. They're trying to move money around. They're trying to move money in a way for the Chinese government not to see it. And they've gotten so good at it that they're really good at money laundering for everybody, right? Because they can also figure out all the ways that the US, if China can't see it, maybe the US can't see it.

Farley (17:01.259) That's right.

Farley (17:12.553) Mm-hmm.

Auren Hoffman (17:16.751) like these Chinese money laundering folks have gotten like become this like the Goldman Sachs of money laundering because they're helping all these Chinese expats. You can see all these like weird like things happening from once and we maybe we benefit from Chinese laundering money out of China, but then we also get hurt by it by the opposite.

Farley (17:22.985) Ha ha ha.

Farley (17:38.091) That's right. That's right. Yeah. I mean, I'm certainly not an expert on that, but yeah, it's one thing to sort of cheer from the sidelines when, 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 else it could be repurposed.

Auren Hoffman (17:54.703) Yeah. Yeah, exactly. 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.

Farley (18:01.077) you

Farley (18:05.693) Yeah, and similar caveats here. I'm not a crypto expert. I can certainly share my perspective. think that you alluded to this. First and foremost, nobody knows the scale of the problem of money laundering globally. People argue about it all the time, go on LinkedIn.

Auren Hoffman (18:34.256) Yeah.

Farley (18:35.475) a chain analysis state of the market or whatever report comes out or a new IMF study comes out and everybody's of, you know, 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 traditional side, you know, the actual volume of money that is laundered globally every year.

I think that regardless of that, the ratio or the percentages of absolute terms, there can't be any comparison between the volume water to crypto and the volume water to just financial society.

Auren Hoffman (19:18.383) Yeah, yeah, yeah, yeah, yeah. I mean, we're talking probably trillions in the normal money movement and maybe billions in the crypto movement.

Farley (19:26.963) Yeah. We used to end up, this is very, very early days, Sarah's stuff, but when we were pitching in our early, some of our early pitch materials, we had a, because we would get this question all the time. was like 2015 is everybody was really, you know, getting really excited about crypto and thinking about, like what could happen with money laundering or whatever. And so we would get this question from investors all the time. And we had this graphic of the estimated amount of money that was laundered through

crypto, kind of on the, was a bar graph and on the 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 the 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 of the bar, like six slides later is the volume of money laundered through the traditional financial system. it's

Auren Hoffman (20:22.405) Yeah, totally. mean, the crypto is not even it's not even one day probably worth of the laundering for crypto for years, not even one day yet for all the others.

Farley (20:26.517) Yeah.

Farley (20:31.628) Now, I will say though, so first, it doesn't mean that we shouldn't tackle both, right? mean, both are important. I just think we still have a ton of work to do in our ability to stop dirty money through more traditional channels. for me, crypto never struck me as a super logical or

Auren Hoffman (20:37.883) Yeah.

Farley (20:58.077) efficient way to move tons of money. 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 recycled cell phones or something like that, that has no market value, kind of make up whatever value you want and ship that and somebody can buy it for something else, you know, some other amount of money. And the difference can kind of be the transfer of value.

Auren Hoffman (21:00.059) Right, there's a record. There's like, it's like, yeah, yeah.

Auren Hoffman (21:24.262) Yeah.

Farley (21:28.043) That is, to me, one of the only reliable ways of actually moving, transferring that much value. I think for crypto, there's probably use cases of sort of small volume, high value, fentanyl precursors kind of comes to mind, really 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 of tens of millions.

so I think that is, I think there are definitely, I wouldn't, I would hesitate to even call them edge cases because they're well-defined use cases that we have to worry about. but I do think even in, as I said a second ago, even in situations like that, you'll, look deep enough, you'll probably still find some alliance on the traditional financial system too.

Auren Hoffman (22:16.785) One of the problems is from many jurisdictions around the world, if you just think of kind of like emerging markets world, like almost 100 % of companies are doing some sort of money laundering because they have to from their own government. They're often have two sets of books. My guess is like every company in Russia has always had two sets of books, but that's probably true of like many, many, many countries that are out there because they're trying to avoid their own government.

their own government may have like certain onerous things or that maybe that's more of an accepted practice there. And so like, you know, money laundering becomes like the norm for for many, many, many companies, and maybe even the majority of companies around the world have to engage in it. And so then then it's like, okay, well, what level of money laundering are we willing to accept to go through, right?

Farley (23:05.417) Yeah, right. Yeah. Kind of back to the, authoring problem that we just discussed in the context of China. Yeah, I, I don't know. mean,

For that reason and other reasons, it can be very difficult to collect data and get transparency in places like that. We're talking about Russia, China, et cetera. I will say also though that 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

available publicly. that's true of many things, but in many of these environments, there is just far more information available publicly if you know where to look. And whether that's the legacy of communism or highly bureaucratic record-keeping culture, whatever it is, there is just a lot of that. It's not necessarily easy to find. You have to be prepared for, you know,

foreign language, non-machine readable, semi-structured unstructured data, but it does typically exist more so than people think, both in terms of the regulators needing help and sort of where to look, also, or compliance teams 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. Like, I don't know that they fully realized that, you know, that record of that, with that receipt sort of scanned and attached to the back of it that says, you know, I'm Chappos 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, scanned right onto the document. That stuff does exist. And it does exist at scale.

Auren Hoffman (24:51.236) Yeah.

Auren Hoffman (25:01.888) Hahaha

Auren Hoffman (25:15.429) Now, partly to, to kind of like, you're, you're doing this jigsaw partly to connect this jigsaw. I imagine like any resolution is going to be like incredibly important. Like, how do you think about any resolution and assume in your case, like the entity is like the corporate entity.

Farley (25:33.32) Yeah. So great, supremely important topic. I would go so far as to say that one of the more important. Pivots, quote unquote that we, you know, went through in our journey as a DAS and SAF company was probably, you know, three or four years ago in, you know, we've been around for 10 years. spent the first

few years of the business really focused on the data acquisition side of things. I'm just professionalizing that and 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 entity resolution company. Because, and I think this is true in almost any

data intensive business, at least part of and probably a significant part of your raw material inputs 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 a hundred percent 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 all of that. But if you rely on 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, get looking over not maybe not a one year time horizon, but a five year time horizon. You know, how do you.

think about building that durable moat if you're necessarily dependent on other people's data. This is a question we've spent a ton of time thinking about. so one of the best, not the only way, but certainly one of the best ways, in my experience, one of the best ways of creating that durable barrier to entry, that moat, is to invest the time and the resources in both the.

Farley (27:51.743) business logic side of any resolution and the infrastructure and scale side the resolution. So being able to do this against really, really large sets of data, both of those things done well, I think can really underpin an entity resolution component to your stack that serves as a differentiator. And the goal there of course is,

Even if you didn't originate the individual components there, if you can be the one who does the best job of stitching those things together, then you can create this derivative product, a unique derivative product on top of it. And then at least you have two legs of the stool. The data itself is necessary, but not sufficient as a piece of the moat.

But then for the secret sauce of how you join things together, the business logic, any AI layer you put on top of that, the scale and the processing side of things that I mentioned, that gives you a much better foundation to build on.

Auren Hoffman (29:01.958) I assume in any resolution in your case, like the false positive is way worse than the false negative or would I be wrong about that?

Farley (29:08.067) Yeah. No, you're absolutely right. And again, this is sort of what I was getting at when, or it's one example, but I was getting, was talking about, invest the time and the resources to build business logic and train models and build infrastructure that works for you because you're going to know your data better than anybody else. Right. And so in our case, yes, a false positive is worse than a false negative. And so we buy

our RNA resolution models a little bit more on the conservative side.

Auren Hoffman (29:41.745) And AI is getting better and better at like providing tools to help on that. So I imagine a lot of things you may 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?

Farley (29:55.987) Yeah, it is very much changing. Let me say one, actually one other thing on the entity resolution subject specifically though, because I think this is actually super important. So I've always thought of, and this is true of the user rules-based approach or an AI driven approach or some combination of both, which kind of spoiler alert, that's where I would say the rules.

is going or certainly where we're going. But the Antity Resolution, in addition to all everything I just said about creating that mode, also gives you a good Antity Resolution allows you to create a network effect in your data. So obviously your data holdings get more valuable as you add more data. That's definitional. But done well, adding new data then

also because it increases the connectivity of kind of previous data sets that you had, it increases the value of each of your old data sets, every new data set that you add. And so that network effect is very powerful. And if you then, as I mentioned a second ago, if you professionalize the process of, I don't want to say sort of the assembly line, because it sounds pejorative, but

the process of really getting new data sets onboard an ETL fast, right? You create that really nice flywheel effect of just adding new value or adding new data value increases and being able to throw around words like flywheel and network effect is also a good thing when you're raising money from best VCs, right?

Auren Hoffman (31:41.371) Well, and also I assume because like asking, asking questions across data sets makes the data like each data set way more valuable, right? Cause 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. and it's really when you're combining many, that's, that's the problem. Also even evaluating how valuable the data set is. Cause you're like, well, if you evaluate in a back

Farley (31:51.541) Correct.

Farley (31:59.59) Totally.

Farley (32:07.039) Yeah.

Auren Hoffman (32:08.611) in a vacuum, may think it's not valuable, but then when combined with these other four may actually like massively increase the other four's value.

Farley (32:15.913) Yeah. Think about the example that we talked about early on a few minutes ago, know, seven layers deep of suppliers across, know, presumably seven different company or countries, excuse me, you know, trailing back into China. You know, that is a data, that is an import data set from the U S you know, and maybe a corporate records data set to show who that who owns the company here and you know, trans shipment data from.

and value add 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 and on and on. And you're back to the Russian doll of data. Yeah. So yes, every, so again, I think the point just as though is that if you break any link in that chain, you really, really diminish the value. And so the flip side is, is you can continue to add data. The ER gives you the ability.

Auren Hoffman (32:51.739) Yeah.

Auren Hoffman (32:58.225) We're back to the Russian doll here. Yeah. Yeah.

Auren Hoffman (33:17.777) And how do you think of like temporal data? this time-based data can like add a ton of value as well.

Farley (33:24.423) Yeah. So temporal data, in general, I think that temporal data is more valuable than non.

Auren Hoffman (33:35.963) Certainly like the price of temporal that is way more expensive than the non-temporal.

Farley (33:38.891) Yeah, would say maybe two things to say there. is that, 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, as we just discussed, you really need to think about your moat, right?

And temporal data to the extent it is ephemeral, meaning that it disappears once something changes and there's no natural change log in the native, wherever you natively source that, that can be very valuable. And so...

Auren Hoffman (34:20.517) Yeah.

Yeah, because you need the history. if you're the only one with the history, then that's huge. Yeah.

Farley (34:26.987) Correct. whatever, like I was saying before, to back to my example of like the ISIL designated terrorist, if that person got designated by the US Treasury and then the next day resigned from their five companies, but that native registry had no record once the change, there was no change log. So that just disappeared into the ether. If you were the only one that had that, that would be tremendously valuable.

Auren Hoffman (34:45.382) Yeah.

Farley (34:56.723) There is a half life to that data, right? is, it is the value of that data. mean, it is definitionally historical, backward looking. So not sufficient again to think strategically, but, but that P that aspect of temporal data is definitely very valuable. think the second thing though, that I would say on the subject of temporal data.

There's kind of a, so as a DAS company and particularly in the red tech risk tech space, we sort of see a few different variants of this temporal DAS.

on the one end of the spectrum is kind of the, the kind of the one time value. And so you have so many, every, every risk and compliance work, just can't read it, 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 you, whatever. so,

Auren Hoffman (36:00.463) Yep.

Farley (36:03.115) But a lot of it starts from that screening bit and so many companies fall under this trap of building a product that delivers a lot of one time value. But then it's sort of, sort of get the customer gets diminishing returns once that initial kind of screen is complete. And 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 ongoing value, there's a, we've seen.

you know, multiple times, countless times, SaaS companies fall into that sort of trap. But then the other side, this is also something that, you know, we have the scars to, to attest to here, but there's, there is a, there is a, there's a different trap on the other end of the spectrum. It's sort of one time is on one end. think real time is quote unquote is on the other side of the spectrum. and.

Auren Hoffman (36:58.459) Just because most entities are not, can't, don't have the capabilities of ingesting it or.

Farley (37:03.947) Just because most, you know, this is not true of all use cases, right? I just, 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 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, because it's changing all the time. but it's only true up to a point for the vast majority of use cases. mean, there's a point of diminishing returns where if you strive for real time, you really need to make sure that the use case actually demands that because real time is very

And it's, it, and the faster you go, the harder it is. Right. and that was, think something that we, that we learned, you know, our, have our, like our sanctions data flows in every 24 hours. That's probably the highest velocity data that we have. but our trade that I mean, our trade, the sanctions data is comparatively tiny compared to our overall holdings. There's 20,000 things, maybe 50,000 things against, you know, billions.

Auren Hoffman (38:22.01) Yeah, yeah.

Farley (38:28.809) but trade data, you know, that's hundreds of millions of transactions that that's, that's like an every two to four weeks. you know, we, we update that data and be again, resolution work. You're able to create more value in the historical data, et cetera, et cetera. And so we're able to monetize that, you know, offer a monitoring capability that's tied to kind of like every few weekends. Yeah. And we have, we have great retention, right? And so I guess it's just a point of temporal data is definitely more valuable, but there is a point of.

Auren Hoffman (38:36.081) Okay, so not too much, yeah.

Farley (38:59.659) diminishing returns there.

Auren Hoffman (39:01.615) Now, I love your advice. So, so many companies they're selling into, trying to sell on the 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 manager's perspective, like these requirements add massive costs and then they often degrade the product. They make the product worse, not better.

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. You know, I don't know if that's a legitimate criticism, but how, how would you allay the fears of some of these folks that are kind of working with government and national security?

Farley (39:51.123) I don't know if I'm actually the best person to allay your fears. Again, scars to prove it. I think that, what would I say here? If you're going to pursue work for the government,

Auren Hoffman (39:54.319) Yeah.

Farley (40:14.331) Just know what you're getting into. think that you're, you know, you're not going to be able to run a typical SAF playbook. You know, you, you, takes months of paperwork even to set up a free trial, right? There's no, you can't give things to the government for free, right? It creates an unfair competitive advantage and

Auren Hoffman (40:16.219) Yeah.

Auren Hoffman (40:35.631) Yeah.

Auren Hoffman (40:39.355) Totally, yeah, it's so frustrating. Yeah.

Farley (40:42.629) you know, as I take, it took us really, I mean, we have a lot of government business. took us a while to figure out how to run it as close as we could approximate to a SAS or DAS playbook in the government.

I think that, you know, you need to, so you just need to know that the traditional playbook won't necessarily.

It takes time. There's no hack. There's no shortcut. mean, look, you can, you can do the accelerators. You can do the SBIR programs. can do there's, there's the government is objectively getting better at working with startups than it used to be. but at the end of the day, you're going to move at government speed and you're going to 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. and if you're intentional about how you work your way into analytical exchanges and briefings and work on the Hill and whatever, you build up enough brand awareness that, know, people will trust that people will trust you when you say I.

You're telling me you want to do this, but what it sounds like you want to do is this, and here's a better way to accomplish what it is you're trying to do. But that simple process of requirements, solicitation and iteration is very, very difficult in government. And it's even difficult if you go, as I said, through the accelerators, through any of the SBIR work or any of those early stage initiatives for government, because you're going to be building.

Farley (42:30.961) You're going to be intermediated by some kind of a program staff, you know, at whatever accelerator group that you're working with. They're going to be intermediated by the R and D folks who own the budget where the agency support to that R and D to that accelerator goes. And then they're intermediating the actual end user who's sitting somewhere in a skiff or is forward deployed or whatever who can't talk to you. so that requirements game.

That game of telephone of the requirements is incredibly difficult and time consuming way to build software. it just takes, there's again, as I said, there's no hacks. just takes a lot.

Auren Hoffman (43:12.593) Now you guys brought on TBG as a growth partner about a year ago and it took a big piece of the company. In some ways it was like a partial exit. It was kind of like a somewhat unique kind of like, how did that like manifest itself? How do you think through that?

Farley (43:21.45) Yep.

Farley (43:28.971) Yeah, it's been a really great partnership. mean, we'll be effectively a year since signing next month, which is hard to believe. There were a few reasons that 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 a partial exit.

I think you could probably bucket those into two or three different categories on the sort of factors internal to the company side of things. I think there was a pretty strong sense that, you we'd been at it for at that point, eight and a half years, something like that.

Auren Hoffman (44:16.805) Assume you had some shareholders that were like, Hey, I would love to get a return on my investment or, know.

Farley (44:20.907) Totally. totally. I know. I mean, absolutely. I mean, as a CEO, being able to return capitalist shareholders and get liquidity for yourself and your early employees and all your employees, know, so thread that needle between kind of returning value to the employees and the shareholders who got you to where you are, but then also preserving that upside for the next transaction. That is a really nice needle to thread again as a CEO. But for us, like the reason we

Auren Hoffman (44:26.617) Yeah, SMAZIC.

Farley (44:50.293) did it. As I said, we've been at it for eight and a half years. And I think there was a realization among our leadership team that if we really wanted to set the company up to continue to grow at the very fast clip that we've been growing and do that in the future and really get to the next level, there needed to be a general sort of up leveling of the organizational maturity.

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. think different companies are attacked this in different ways, right? But for us, you kind of know what needs to happen. You know, there's more strategic work you need to do. You know, you need to rethink how you kind of package and price your products in the market. 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 hard to self-motivate your way through that. And you're so operational. You're thinking a year out, a year and half out, two max maybe, but there's nobody saying like, what is the five year strategy and what is the org chart need to look like in four years and, know, at each quarterly.

Auren Hoffman (45:53.467) So, yeah.

Farley (46:18.091) milestone to get from there. Like how do we really think long-term about this business? It just, it feels totally hand wavy when you're in kind of startup operational mode because you're just so focused on the next year or so. So we really needed somebody to kind of push us to do that. And it's been awesome. I mean, our team is really stepped up. I mean, I think it's made us all better executives, which is great. And just as a company, you know, more.

organizationally mature. But then I think the other big reason we did this was just, if you look at the dynamics of the market that we're in, highly fragmented, you could count on probably a couple fingers the number of companies over a hundred million in ARR, Or whatever arbitrary level gets you to kind of like maturity, right?

You we have the effects of all the 2021 money that, you know, propped up all these businesses, unreasonable valuations, and everybody is still in this kind of a whole and grab mode, highly competitive, you know, propped up by VC money. And I think that that's fine, except that with heavy competition comes a lot of price pressure. And you're going to see a start, you know, sort of a separation of

companies that have good economics, sustainable business models versus those that don't. And we really wanted to position ourselves as an acquirer, as a consolidator, as the industry inevitably starts to consolidate. So, for other CEOs who might be in our position or in my position, in our company's position, I would just...

for any transaction, obviously something like this is very consequential. Just know what you're trying to get out of it. We sort of had a pretty good idea of what we needed as a business in order to get to the next level, and we designed a process to get us there.

Auren Hoffman (48:26.513) Now, a few personal questions. you are famous for having like a big Movember or style mustache 12 months out of the year, not just in November. and you know, that was like, you know, that was definitely big in like the 18 fifties, but like, do you think it's going to make a comeback? Like there's not that many mustached people anymore.

Farley (48:34.371) That's right.

Farley (48:45.044) Mm-hmm.

Farley (48:50.671) I'm a one man, one man, come back. You know, was a total, on a whim, probably like 18 months ago, I just was like, gonna do this. And here we are. And now I feel like I can't stop.

Auren Hoffman (49:09.905) You can't do it. It's like part of your brand now, right?

Farley (49:13.823) Yeah, and I shaved the other day, you know, probably a few weeks ago and I forgot, know, trim your lip the same way when you're trying to grow a beard and it looked so bad and I was like, it scared me and now I'm just locked into this. Yeah.

Auren Hoffman (49:30.394) I like it. Two more questions we ask all of our guests. What is a conspiracy theory that you believe?

Farley (49:37.611) There are so many that I want to believe. think that I am 100 % all in on these UFO conspiracies that have bubbled up over the last few years. I am so energized that it's gone mainstream. It definitely feels like the dam is breaking. Exactly.

Auren Hoffman (49:49.401) Ooh, okay. Yeah.

Auren Hoffman (50:00.133) Yeah, I mean, like the New York went like was a year or two ago when the New York Times started writing about it, which is like kind of crazy.

Farley (50:05.963) Yeah, I will say that I know enough about how the government works now to know that a massive, sophisticated, coordinated cover-up is probably not what's going on. But I do want to believe that there's more to the story and somebody knows something somewhere.

Auren Hoffman (50:30.289) Okay, I love that one. All right, last question. We ask all of our guests. What conventional wisdom or advice do you think is generally bad advice?

Farley (50:37.981) Hmm. so I think it's stretch probably to say this is bad advice. but, I think the thing that I tried and tried to live for a long time was, hire good people and get out of their way. So this, you know, this is sort of.

conventional wisdom in the DAS and SAS world, right? I think that this can be good advice sometimes in some situations, maybe if you're a super mature business with incredibly well-defined culture, like a Netflix or something. But I think, I don't know, in general, even with your most senior team, I don't know, in my experience, the best people that I've worked with want to be sort of

both led in the sense of, know, hiring people get out of the way, but also managed, right? Like they want to know 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? You know, they want to know, you know, and get constantly through, you know, remind.

what they're doing is contributing to that overall kind of company strategy and how they can course correct if need be. So I don't know. think, of course, like as the company gets bigger, you have to push more decision making down on the team. And this is probably where a lot of this is sort of user error rather than this is like generally bad advice. But I think that so many people kind of hear people talking about this concept.

hired with people the other way and they sort of internalize that and then sort of abdicate the responsibility of management when it comes to the senior team. And I think they probably do that to the company's detriment.

Auren Hoffman (52:36.698) Yeah.

Auren Hoffman (52:40.913) Well, part of the problem is like, if you have like skips, if you have like, if you have many layers in a company, well then like everyone's hiring good quote unquote good people 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's going on? And so it could like, it could be many layers where people don't really know what's going on there.

Farley (52:54.43) Yeah.

Farley (53:01.011) Yeah, you better have really good leading indicator KPIs because it can't just be, you you are responsible for this thing. I hired you and I got out of your way and it didn't work because that doesn't help you at all. So, yeah, I don't know. That's my point.

Auren Hoffman (53:06.106) Yeah.

Auren Hoffman (53:18.661) 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, you know, has like 40 directs or something. So he has very few layers and in a company of that size.

Farley (53:31.509) for sure.

Farley (53:36.415) Yep, yeah, for sure. Again, if you are incredibly thoughtful, intentional, and probably a pretty mature business with really good leading indicator KPIs, then yes, maybe I could be convinced that this is really good advice, but in my experience, it hasn't been.

Auren Hoffman (53:51.077) Yeah. Yeah, no, I'm with you. Like if you're changing anything, you got to, you kind of have to be in it, to do it. All right. This has been awesome. Thank you Farley Masco for joining us. We're all a desk. I follow you on LinkedIn. and definitely encourage our listeners to engage with you. This has been a ton of fun. Super interesting.

Farley (53:56.447) Yep.

Farley (54:09.931) Yeah, well, no, thank you, Orin. This has been great. Thank you again.