Customer Retention Solution Gravy Gets Dough With $1M Seed

As software and e-commerce subscription companies age, they often encounter failed payment transactions due to customers' expired or closed accounts, or insufficient funds. Unfortunately, the success rate of re-capturing those customers is typically very low.

Casey Graham and Renee Weber experienced this at their previous membership-based startup. Despite the fact that they were growing month over month, they continued to see between 10-12 percent of the credit cards on file fail.

They created an internal solution to increase retention, but it wasn't until they sold the company and started consulting for other entrepreneurs that they saw the value of that solution.

"As you're growing a subscription-based business, that's a lot of customers going out the back door," says Graham.

Two years ago, the duo founded customer retention startup Gravy, a high-touch fintech solution to help subscription-based businesses recover and retain customers. To date, Graham shares that the startup has recovered more than $15 million in single, initially-failed transactions since 2017.

Gravy's business model is half tech-driven by their workflow automation platform and half people-driven by a team of retention specialists.

"The way we're winning in the market is we're not just another app. We have the technology driving it behind the scenes, but we have people on top of it that are helping customers come back online," says Graham.

Gravy takes the burden off the client by connecting into their payment processor using their API and pulling up all of the failed credit card data into their platform, appropriately named 'Biscuits.' The Gravy team is able to integrate seamlessly into the existing client support staff, even generating a company email.

Once the data is pulled, it kickstarts a 60-day follow-up process that combines multiple communication points, technology- and people-driven, to get customer back on board.

"Technology alone does not fix this problem. It only recovers about 15 percent on average. When you add the personal touch from our retention specialists, we can recovery back up to over 50 percent," says Graham.

The Gravy client receives bi-monthly updates on their own dashboard with retention and recovery insights and customer feedback for the product and marketing teams.

The retention specialists also undergo brand training and ongoing assessments for every Gravy client to make sure they maintain the company's brand integrity. Clients are largely in the online education, health & fitness box subscriptions, and SaaS markets.

Graham says that Gravy has scaled relatively quickly due to its plug-and-play features, streamlined internal processes for onboarding clients, and focused mission.

"What we do is very simple, but doing it for 500,000 conversations is obviously the hard part. Our vision is to return $1 billion back to small businesses by the end of 2023," he says.

The platform charges clients a monthly management fee plus a commission fee for every client recovered. "We based our revenue model upon success," Graham says.

Gravy is cash-flow positive, but raised a $1 million seed funding round last week to accelerate development in three main areas: technology product, doubling their team to 60 employees, and streamlining internal processes.

The startup currently operates nationwide and in Canada, the UK and Australia.