Learn how Subsets, a Copenhagen-based startup, is using explainable AI to transform customer retention in the digital subscription landscape.

Recurring revenue is pretty much the holy grail for any business — it’s precisely why Apple has segued towards being almost as much a services company as it is a hardware company, with 20% of its revenue now emanating from Apple TV+, Apple Music, iCloud, among an array of other subscription and non-subscription-based services.The cost of acquiring new customers has also reportedly increased by more than 200% over the past decade, which highlights the importance of predictable revenue streams. But there are inherent challenges with subscription-based business models — not only must companies focus on growing the number of people willing to pay for a given service, but they must also be mindful of retaining those that they already have. Reducing churn is the name of the game.This is something that fledgling Danish startup Subsets is setting out to help companies achieve, with an AI-enabled platform designed to “bridge the retention gap in the subscription industry.”ExplainableFounded out of Copenhagen in 2022, Subsets leans on so-called “explainable AI” to tell companies which current subscribers might be about to jump ship, and serves up “experiments” to find the best way of enticing them to stay.Explainable AI is a concept that describes AI’s ability to “explain” or justify any decisions and insights it provides in a way that humans can parse, and it has emerged as one of the cornerstones of a wider societal push to make AI more trustworthy — most of the major large language model (LLM) providers are trying to appease critics by addressing the much-maligned “black box” problem.Six months on from its launch, Subsets has already claimed some decent customers including the New York Times’-owned Athletic and Danish newspaper Børsen. But the company is now looking to double down on this recent traction with a fresh $1.65 million in pre-seed funding led by Nordic early-stage VC Upfin and Y Combinator (YC), following Subsets’ participation in YC’s Summer ’23 program.The media businessWhile Subsets could be applied to any subscription business, it’s currently focused on the digital media vertical.“We are limiting our use case to digital media at the moment — this includes digital publishers, streaming [platforms], subscription apps, and telecoms,” Subsets co-founder and CEO Martin Johnsen told TechCrunch. “Subsets can be applied more broadly across digital consumer subscriptions later — I see us broadening into, for example, mobility, banking, and food delivery. Even more offline subscription categories, as everything becomes more digital.”Companies connect Subsets to their various internal systems, such as CRM (customer relationship management), CMS (content management system), billing, data warehouse, and so on to garner subscriber data points — this can include things like demographics, how each subscriber consumes a specific piece of content (e.g