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Growing Lean
Charting the Course of Entrepreneurial Success with Select's CEO Carlo Cisco
Unlock the secrets of entrepreneurial success with Carlo Cisco, the visionary behind Select, as he joins me, Dylan Burke, on the latest episode of Growing Lean. Witness the tale of Select's remarkable journey, as Carlo shares how he harmonized his financial prowess and event planning skills to craft a membership service that connects discerning consumers with top-tier brands. This isn't just a story of creating exclusivity; it's a masterclass in fostering a community that values experiences and relationships, breathing life into a business model that thrives on member engagement and meticulously curated benefits.
Step into the world of startup resilience and learn how Select navigated the tumultuous times of the pandemic, emerging not only unscathed but with strides in member loyalty and a renewal rate to rival the giants of the subscription service industry. With an eye on the pulse of today's financial climate, Carlo delivers actionable insights on achieving a delicate equilibrium between growth and profitability. For anyone looking to fortify their venture with robust cash flow and unwavering customer value, this dialogue promises to be an indispensable resource. Connect with the essence of Select and absorb the wisdom of a CEO who's expertly charting a course through the entrepreneurial waters, ensuring that his ship not only sails but soars.
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Hey folks, welcome back to the growing Lean podcast sponsored by Lean Discovery Group. This is your host, dylan Burke, also known as Deage. I'm happy to be here today with Carlo Cisco, founder and CEO at Select. Welcome, carlo. Yeah, thank you so much for having me. I'm excited to learn more about you and your business. To get us started, can you give us a little bit about your history and background and what led you to Select?
Speaker 2:Sure, yeah. So I started my first business when I was 18. I had like an event planning and promotion business while I was in school at University of Miami, so mostly doing like large scale events bringing anywhere from 100 to sometimes upwards of a thousand people. So that did pretty well. At the same time, I was a finance major, so I had positions across various areas of finance everything from merchant processing to wealth management and ultimately, when I graduated, I moved up to New York, got a job in equity trading. I had gotten into that because I had done well in investing during school.
Speaker 2:But as much as I love being involved in financial markets, it's very fast paced. It's very exciting. You get to learn a lot about a lot of different companies. Equity trading was a little bit the opposite of investing, where it's very short term focus. You're sort of capitalizing on market arbitrage and other short term strategies and I kind of liked to get big on things I really believed in. Apple was my first stock back in 2005.
Speaker 2:So year and a half into that I was getting the entrepreneur bug again but didn't really know anyone in the startup space and sort of out of nowhere acquaintance of mine basically got a job with Groupon, and this is back in 2010. Groupon was in the process of becoming the fastest growing company in history by revenue, so reached out to congratulate him and a few phone interviews later ended up moving out to Japan to help build Groupon in Japan. So that was a really incredible experience. It was sort of the ultimate startup on steroids story in Japan. I also epitomized that. But we became the number three out of 48 total countries within three months basically so behind the US and the UK, so it was one of the better markets for Groupon and it really kind of showed me that there was a huge demand for a new way for merchants and customers to connect. But I felt like perhaps what they were doing didn't really work as well for premier customers or premier brands and venues. So that was one of my big takeaways and that's certainly part of the inspiration for select as well Sort of kind of combines all of those experiences.
Speaker 2:We wanted to create a membership model that was all curated places or brands, best in categories, how we'll typically refer to it, and then in all cases, whatever the benefit is and it's not typically 50%, but it's typically like 15, 30% can go as high as over 60.
Speaker 2:So a lot different than what you would see from perhaps a credit card, for example, and someone could get that anytime they want, as often as they want, because our thought process there is that this hire to your customer high income, whatever they're busy so they can't go at like an off time. They're not the one off sales are actually kind of annoying to them even because they might miss it or whatever. So we felt like it was a good way to kind of combine customer acquisition and customer loyalty and build a membership around that and effectively over time it's basically proven true. So in a way every experience I had kind of inspired select, but Groupon probably takes credit for perhaps being the biggest inspiration, just because it opened my eyes to how big that opportunity was, you know, based on how fast they grew at that time, and obviously it's a different story today. But this is many of the years later and they're also effectively the only ones still around doing what they do.
Speaker 1:That's amazing, that's so awesome to hear. And can you run it through me? And run me through it in a bit basic terms? So it's not a bank. How does it work?
Speaker 2:Yeah, yeah. So select today we describe as a digital membership and concierge service. We connect people with exclusive events, savings and perks at over 1.3 million different locations all across the world, as well as with a variety of online brands and services. So you know, people have to apply for access. We do turn people away, unlike some others in the space, you know and in addition, they have to pay an annual fee for membership, but then, in return, access to all the different benefits. All the events are concierge. It's all unlimited, unrestricted, you know. So people can do, you know, as much or as little as they want, but on average, members get about two and a half times the membership feedback just in benefits, and then they're also getting access to our concierge and our events in addition.
Speaker 1:Okay, amazing. And what is the qualifying criteria?
Speaker 2:Yeah, I'm.
Speaker 2:We're mostly looking for people who will be able to basically take advantage of the ecosystem we've built, because, at the end of the day, it is a ecosystem right like we want the partner businesses to be happy, we want the members to be happy.
Speaker 2:So, you know, in order for that to be the case, like, you do need some sort of threshold of disposable income, and disposable income can vary. You know what sort of like creates comfort based on where you live, or, you know, perhaps, personal background or whatever the case might be. So that's certainly the main thing we're looking at. But then we're also looking at, like, education, interests, employment, career trajectory, like basically everything to figure out, like is this person going to be a member and, you know, truly benefit from, from what we do? And and could they be a member over the long term and really take advantage of what we have to offer and and advice, a versa, be like an active participant with the partner network? So so that's really what we're looking for. An income is one determinant but, but it's definitely not the only one.
Speaker 1:Okay, awesome. And in terms of revenue, is that generated through the users yearly subscription or do the partners also pay fee?
Speaker 2:So we don't charge any of the partners. The membership fee today makes up likely about 90% of our revenue, so it's certainly the majority. There are some cases where we're getting affiliate revenue back and then there are also some case cases where we'll do like event sponsorships. So typically for some of our larger events and series, brands will effectively pay to be associated with that and to get marketed to the members and also externally, you know, as a as a sponsor of an event like that. You know, over time we think that mix is going to continue to diversify a bit. However, we think the membership fee is actually always going to be greater than half of total revenue.
Speaker 1:Okay, yeah, that's amazing. And in getting where you are today, what have been the biggest challenges that you faced?
Speaker 2:Yeah, I mean, look, any startup, especially if you're growing quickly and you know it's a tech company like you're going to have a lot of challenges, that's for sure. You know there's you know certainly at times, market conditions. You know, as a startup you need to generally raise outside capital. We have we've run about two thirds off of revenue. That's a nice thing with those membership fees, as we're able to use that to make the business better. But you know, I would say a few of the biggest ones.
Speaker 2:You know, certainly the pandemic was a bit of a curveball for us. That kicked off. Our most popular categories were dining, hotels and events. So that's an interesting time period for us. But we just innovated really quickly. We started hosting digital events. We added take out and delivery benefits with a lot of our restaurants and particularly at that time, because they're mostly higher caliber restaurants, they weren't really on these various platforms. I would say perhaps a larger portion of them are today, but still not the majority. We did all these like at home focused lifestyle benefits, added business benefits, all of that and ultimately ended up with a higher member renewal rate in 2020 than in 2019 and of course, it's shifted upward from there and I would say more recently.
Speaker 2:You know we announced a credit card earlier this year. Also, I think the whole world knows that, like, vc, funding for startups is definitely lower than it was a couple years ago. So you know, the VC funding is something you have to adjust to. However, our model just kind of works and you know, I think a lot of the businesses that made less sense are getting flushed out of the market sort of just about every day Pretty much, no matter what amounts they raise, to some 10s of millions, some hundreds of millions. It doesn't really matter if you don't manage it correctly. And look, that still plays a role because certainly when it's a better system and market for capital that lets businesses that do have great models scale a bit more quickly and more quickly, you know, expand their offering and do the things that they do.
Speaker 2:And then, you know, certainly with the credit card, you know we were able to attract a very good partner set and it's good that we established that at the time that we did. But but I would say, like sentiments around fintech have have changed a bit since a few banks blew up, right, although now, you know, the markets kind of come around to realizing why certain companies blew up and you know sort of that. Everything we've built is basically very much counter to that entire story. So it ultimately works out for us. But yeah, I would say those are a few. Obviously, you know any startup it's a roller coaster. You have new challenges every single day.
Speaker 1:Yeah, 100%. And is it safe to assume that retention is like your biggest what do you call it biggest goal with your clients, apart from new customer acquisition? I'd imagine.
Speaker 2:Yeah, it's certainly one of the biggest, for sure, and especially because it's been trending up pretty strongly. So so our annual retention rate right now is a little over 75%. So that would put us in the ballpark of, or even slightly better than, someone like Netflix, for example. So that's really kind of about as high as like direct consumer software subscription. You know, we do think ultimately it can move higher.
Speaker 2:That's also part of what we like about the credit card, quite frankly, is credit cards have very high retention rates despite not doing a whole hell of a lot.
Speaker 2:You know there's the core, of course, providing payments and doing some sort of rewards, but but there's not a lot of diversification, nothing like what we have. So that's one of the things we like there. But but the cool thing about retention as a goal that I like, just as like an operator is that like just about every positive thing you can do feeds into that goal Getting customers to engage with your product, making the product more valuable, making the user experience better All of these things help build into that retention number. So it actually is a really great measure of like hey is the business working out? And then, of course, the other investor favorite but it makes sense is like the LTV to the cat ratio, which is just like what's like the value of your customer over your life, their lifetime verse, like the cost of getting that customer. So so retention is always top of mind and definitely one of the biggest focuses.
Speaker 1:Okay, 100%. And apart from retention and custom acquisition, what are your other performance indicators that you look at?
Speaker 2:Yeah, that's a good question. So we definitely look at the cost of acquisition. Are we acquiring people efficiently? We look at broader engagement. We generally like to see engagement going upward, especially as the membership grows. Like membership's going to roughly double this year, so that means that engagement should effectively more than double. Right Now it's personal because it depends on when those people are joining and all of those sorts of things. But yeah, we're looking at engagement, we're looking at overall efficiency. We're also just looking at, like, would we be excited about this if you know when we are all, in a way, you know, customers of select? So those are basically the different things that we think about. So perhaps engagement would be, like, you know, number three after just sort of growth and retention.
Speaker 1:Okay, amazing, and on this journey, how long have you been doing this for?
Speaker 2:Yeah, so we have been growing select for about eight years, so we've been doing this for a minute, so we've definitely seen all the different ups and downs that you can see. But you know, it's an exciting journey and it's also exciting after that period of time to be growing as quickly as we are right now.
Speaker 1:Yeah, 100%. Could you run us through a couple of the notable accomplishments on a timeline sort of basis?
Speaker 2:Yeah, sure Cut out for a second, so sorry.
Speaker 1:No worries.
Speaker 2:You know, timeline perspective, you know I think getting up and off the ground was was number one, really right, and that happened, you know, really towards the end of 2014. And as soon as we were up and off the ground, you know I would say paying customers as the next one, and we took a different approach there. A lot of people will just kind of give away things at first to like kind of user tests, but I didn't think that was an accurate user test, so we did a beta instead, set up a table like New York Tech Day and just like hard pitched people on signing up, signed up a few dozen people and then, of course, continue to take it from there, you know, sort of when things really picked up for us. So we actually closed the publicly traded client before we started formally launching the membership. So, like during this beta phase, that was UDR, which is a publicly traded real estate investment trust. They bought memberships for some of their buildings.
Speaker 2:But then early 2015 is really when, you know, the direct consumer membership started to take off. That's that's when that started to grow quickly and you started to see the revenue go up like that, and then for a while during that period is just about growth and, in our case, like adding markets, and we always had like hotel and travel benefits that were global, but we sort of did a market to market launch approach. So now there's about 25 of those markets, but we have members in like 11 countries. So, like, well, outside of any of those markets, those are almost all in the US. There's one in Canada, one in Mexico. So, you know, these days it's a bit more about like, what can we do next? Like what's the next value driver, what's the next growth driver? Really.
Speaker 2:So you know was around the end of 2021 when we started to put together our credit card deal, so that was a big milestone for us. We were able to announce that this year, so that also, in a way, felt like a milestone. And you know, now you know we're just getting into all sorts of different things. So I really think the next sets are just going to be around compounding the membership growth and then like getting into some other market areas effectively that we think are interesting. We think private market investments are interesting. We think AI is interesting. We built our first like internal AI in 2018. So we've had some experience there, but we think there's going to be a lot happening in that side of the market. So, yeah, most of it's now is around innovation and using that as a catalyst for for future growth and for member value.
Speaker 1:Okay, amazing, and yeah, I can definitely agree that AI is going to be a huge topic of conversation. It's exciting times we're in at the moment. What are the tools that you use besides your internal one?
Speaker 2:Yeah, so we're certainly using the platforms operationally, both chat, gpt and Bard. We find that they're good at different things. We find Bard is good for research, chat GPT is good for like bouncing agreements, back and forth analysis, that kind of stuff. And then the internal tool we built that's like a concierge assistant, so it basically just helps our concierge team do an awesome job while handling, like, a greater flow of requests. But now we built like a question and answer one, which is something a lot of companies have done, but we wanted to build our own rather than using someone else's.
Speaker 2:And, generally speaking, when we build technology, we build it with the mindset of we're going to use this, but we also want to, in the future, let our partner network use it right, because there's about 1000 businesses that power those 1.3 million locations. So we want to be able to provide them with really cool and useful tools, and sort of the most recent one that's in like a testing now and this will be, I think, a very crowded area of the market, but a lot of people will do it wrong is effectively like a travel itinerary planner type of AI, so basically can map out a whole trip for you, which I think is something that's pretty cool. It's sort of like makes the travel agent experience instant and then in our case we're able to add those booking abilities plus, if someone has select, then all those savings abilities and special perks as well.
Speaker 1:Yeah, that's, that's awesome. I love it. Love to hear it. And so we're running out of time now. But before we go, what piece of advice would you like to give to other business owners looking to succeed in this crazy technological world we live in?
Speaker 2:Yeah, you know, I think it's. You know, grit and persistence are really important. You got to make sure that you're passionate about what you do. At the same time, I think you know, look, most businesses don't ultimately pan out, so you want to listen to market signals, right, Like we've had a long journey and it wasn't always straight up into the right. Sometimes it was a little more flat during the pandemic, maybe a dip to little right, but we could tell that, like, the overall trend line was up. And if that's the case and you're willing to fight, then you want to push and get it done.
Speaker 2:I do think that these days you know that sort of cash flow analysis and being a bit smarter on the P and L front. I do think that's back in style and I think it's permanent. I don't think that's a temporary thing. So these companies previously that were able to just grow revenue while lighting money on fire, I think that's gone. So if you're looking to start that type of business, you know I don't think you're going to have much luck anymore. So, yeah, I guess those would be the pieces of advice.
Speaker 2:You want to make sure that you're passionate about what you're doing and you want to make sure that you're providing unique value to whoever your customer set is. That's what makes a company valuable, that's what lets you charge, that's what you know enables P and L to look good. It really just comes back to customer value at the end of the day.
Speaker 1:Amazing. I couldn't agree more and, carlo, thank you for your time today. I have really enjoyed it. What is the best way for our listeners to reach out to Carlos Cisco if you have any offers for them or if they're looking to sign up for select?
Speaker 2:Yeah, so I'm just my name on every social channel. The website is just meetselectcom. Feel free to apply there or ask our little bot any questions you might have, and if it can't answer real humans, will we do have a whole concierge team that jumps in anytime they're enraided. But yeah, those are really the best ways to reach out.
Speaker 1:Amazing. Thanks so much, carlo. Yeah, thanks for having me.