You’re about to meet an entrepreneur who recently walked away from a funding round. And the surprising thing he did instead.
David Barrett is the founder of Expensify. If you ever had to fill out expense reports, you know it can be a hassle. Well David’s company makes it easy. For example, users can have Expensify automagically import all their charges from their credit cards.
In this interview I plan to learn how to get businesses as customers and how to hire if you don’t have tons of money, like many San Francisco startups do.
David Barrett, Expensify
David Barrett is the founder of Expensify which does expense reports by importing expenses and receipts from your credit cards and mobile phones and submitting expense reports through email and reimbursing everything online using QuickBooks and direct deposit.
Andrew: Hey there freedom fighters. My name is Andrew Warner, I am the founder of mixergy.com, home of the ambitious upstart, and you are about to meet an entrepreneur who recently walked away from a funding round. And the surprising thing that he did afterwards, we’ll find out about in this interview.
David Barrett is the founder of Expensify. If you have ever had to fill out expense reports, you know what a hassle it could be. And so, David’s company makes it easier for example, users can have Expensify, automatically import their charges from their credit cards, no manual entry. So, I want to find out in this interview, how he built this company. I want to learn how he gets business, his customers.
I’m hoping to find out, how he hires people, even though he doesn’t have the tons of money that other San Francisco companies seem to have. And I want to find out, how he keeps clients paying month-to-month and keeps them happy doing it.
I’m going to do all that, thanks to, well right here, got him on my mug right here. Walker Corporate Law, Scott Edward Walker is not just the entrepreneur’s lawyer, he’s also the guy who sponsors this program. Check it out at Walkercorporatelaw.com, if you are looking for a lawyer, and you are an entrepreneur. David welcome.
David: Hey, good to be here. Thank you.
Andrew: What kind of revenues are you guys doing now?
David: We are in the millions. And so I would say, recently it was in the survey were it’s unfortunate, the smallest bucket in the survey is between zero and ten million and then, ten and above. And so I would say, we’re about halfway in that range.
Andrew: Halfway between zero and ten million?
David: Right around there, yeah.
Andrew: You don’t talk about it publicly in specifics, but your employees know, right?
David: Oh yeah, yeah. In fact the only numbers that we have confidential in the company, are the people’s salaries. Even that we debate whether or not that is a smart decision. I think the hard thing is, I think transparency is critical for any company, especially a new startup. And realistically it’s like, for things like revenue and customers and things like this, there’s really no reason to keep it secret inside the company. So I think that transparency is the way to go.
Andrew: I see. So it’s not just that you are sharing it with people within the company, but you’re okay that data leaks out, that other people find out?
David: Yeah, I mean like first the numbers are always changing. So whatever number you get, it’s always different the next day. But realistically, it doesn’t matter whole lot. And so I would say that, we’re not too paranoid. And I guess ultimately we hire people that we trust, and so, we don’t really worry about it a whole lot.
Andrew: What about this? So I wanted to check you out. I had all kinds of information about you, but I’m always constantly worried that I’m going to get my information wrong. That someone or some company is going to come across better on Mixergy than they really are and they will fail, two weeks afterwards. So I talked to a couple of people who work for you. Melissa and Louise. And I sat down I said, “Is this for real? Did this really happen? Did you guys really go away for? And we’ll talk about it later, and they confirmed it.
And it occurred to me though, David, if I was a competitor and maybe I sweet talked one of you people, I could find out things like, where you get your customers. What your on boarding flow is like. Is there any danger, that that stuff could leak out and your competitors will have it?
David: Not really because realistically I mean, if you’re good, you have enough ideas of your own. You’re not actually trying to steal anyone else’s. And if you’re out there trying to steal someone else’s ideas, you are not any good in the first place. And so we really only worry about the good people, and they’re not like paying close attention to us. We don’t just look at our competitor’s stuff. I’m sure we could, we could create fake accounts and do all sorts of stuff, but we just don’t care.
Andrew: You don’t do that, you don’t create fake accounts to say, what do they do that we can learn from?
David: No not really. The only time we did that was, with Concur, they are like the Microsoft of expense reports if you will. They are up in Seattle. And we wanted to understand their pricing. And so, we created a whole bunch of fake companies basically, at different levels to kind of understand their pricing model. But that was forever ago. And I think that one time, a recent competitor launched out of the blue and we may be checked him out one-time, but never again. So I would say by and large, we just don’t really care.
Andrew: All right so, somewhere around five million in revenue, how old is the company?
David: So I started the company in 2008. It was April 2008, when we sort of, when I left my previous company. So my previous company was [??]. And then immediately after acquisition, I decided I wanted to do something different. I spent kind of the year in my free time, playing around with different ideas. And it was only in April 2009, 2008, when I left [??] and started Expensify.
And so, but then it was just kind of me and then it eventually me and a co- founder, [??]. We launched an initial idea, in September 2008, which is an entirely different product. It was a prepaid debit card product.
Andrew: Why would you want to do a debit card product?
David: Because when I started. My previous start-ups have tried to sell a product that I didn’t understand, and that’s terrible. There’s nothing worse than, not wanting to use your own stuff.
Andrew: Red Swoosh, you guys did peer to peer. You even had a bit torrent client, right?
David: Yeah, we did that peer to peer content distribution. So, it’s like bit torrent but not for pirates. So, smaller user base but more profitable, so you don’t get sued into oblivion. So, we were acquired as cool but there’s only five companies in the world that need to move data at the scale we need to move them.
So as a result when I started I wanted to do something that solved a problem that I personally experiences and paid to have solved. Something that can be sold directly to individuals and then something that, deals with money. I figured the best way to make money is to find somebody to sell money. I mean it works well for the banks, why not me. And so we came up with this entirely different idea, we’d launched that at Tech Crunch 50 in 2008.
And everyone’s like, Wow, your credit cards are interesting and blah, blah, blah, but your expense reports are incredible. But our expense reports are just billed as a proof of concept for this entirely different technology and we’re just going to throw away the expense reporting thing and we’re done.
Andrew: I’m sorry, let me pause because I want to dig in and really understand your process. I especially like your story because you were so methodical about it. It means that we can learn your process and apply some of it. When you say what your criteria was, I get it, I like it. When you’re talking about selling to businesses and selling something that’s connected to money, what other business ideas did you have that fit that criteria that you just shared with us?
David: This initial idea, this prepaid debit card…
Andrew: Was it just that or did you have a series of other ideas that…
David: There’s a million. Ideas are cheap. It’s easy to come up with ideas. There’s like a billion ideas out there, the hard…
Andrew: So, how many did you have up on your white board before you said, we’re going to go with this card?
David: I don’t know. Gosh, the first year’s brutal. When you’re trying to come up with your idea, or rather, it’s not just about coming up with ideas, it’s about discarding ideas. And you come up with something and it sounds great and then you do a little bit of research and actually it’s stupid, or maybe someone else is doing the same thing and it’s so much better.
But, I don’t know, it’s a painful time where basically you just… it’s this humiliating time where basically everything you try is failing. So, the real challenge with success is that until you’re a success, you’re just kind of a failure. And so, it just feels like nothing’s happening for a very long time. And so I guess I’d say, there’s no real secret sauce to it other than just, I don’t know.
Andrew: Do, you remember one of the other ideas that just didn’t work out even though it fit the criteria that you talked about?
David: Well, again, I think the key thing there would be this prepaid debit card idea that we And that the idea was, imagine a prepaid debit card that maintains a zero balance. So, basically, when the purchase comes into the card, it’s routed in real time to a different credit card.
So you could give out these cards to different people and say, this card works up to $500 a day, this card only works $10 per purchase and only at Starbucks or something like this. And so, this very flexible prepaid, debit card platform that allows you to issue credit cards to friends, family, and it’s a million possible applications.
And so, but when I went to the banks around this, and just for years I was just talking with these banks, and all of them are saying not because it’s just too crazy and it’s too weird and it’s too risky. Because in 2008 was just not a good year for the banking sector overall and so, I realized I needed to sound low-risk, I needed to sound boring. I’m like what is the most boring thing I could possibly think of and aha! Expense reports.
So literally, that’s why we came up with expense reports because it was the dullest thing I could imagine. And when I launched that, I realized that it’s anything but dull, it’s actually a fantastic market that has just been overlooked for so long. And I think that the key thing is not to be too attached to any idea but just to stay open to recognizing that any idea that’s amazing must not sound amazing on the surface. In fact, it probably sounds really stupid because that’s what means no one else has done it.
And so most of the things that we did, they just sounded completely insane. So, all the people who knew better, and everyone will always tell you, “Look, let me save you some time. This is ten reasons why your idea is going to fail.” You know, it’s easy to come up with reasons why something’s is going to fail, and that’s way you just stop asking. Just start doing it, figuring it out.
Either you’re going to fail or you’re not, but eventually something is going to work and then generally that something is going to be something that no one else even considered and probably something you didn’t consider before either.
Andrew: So, did you actually create this debit card with the zero balance? You didn’t even get to that?
David: No, we got it all, we got the banks, we got MasterCard, we launched the product at that Tech Crunch 50 and then we got so much press out of this, everyone’s like, MasterCard called us up, they were like what is this crazy thing, we never approved this. And they’re like, “We thought we were doing expense report reimbursement, what’s this wild thing?” And we’re like, “No, no, no, it’s fine. You totally approved it, check the paperwork.”
And they did check the paperwork and one of our partners misfiled something, so literally the day after launch, we were shut down and so we were like, “Fuck. What are we gong to do know because our whole product just got canned.” And we’re like, people really seemed to like this expense reporting concept, let’s do something with that and then that’s sort of what got us on this path and it’s just such a better idea than what we started with.
Andrew: The first version you told April Dykeman in the pre-interview looked like ass. What did you mean by that?
David: Well, again, the first version we intended to throw away. We had no intention of actually doing it. It was a proof of concept of this card technology. And plus we’re not designers, and I wrote most of it myself and I’m certainly not a designer. But also this was back in 2008, this is before a lot of things like Bootstrap, a great CSS framer from [??] all of the great tools that we just take for granted now didn’t even exist then. J Query was like a brand new thing at the time.
And so, the world changes surprisingly fast and at the time, yeah, it looked pretty bad and it’s okay because really when you’re starting out, I think design is something, it’s the price of entry anymore, it’s very, very important, but focusing too much on design too early is highly limiting because it slows you down. It’s hard to make something look amazing, but to make it look amazing while also changing radically on a daily basis is very, very hard.
And so, I think for us it was much more important to get something that worked, confirm that people will even vaguely liked it at all, realize that we were completely wrong and do something totally different, and then make it look awesome.
Andrew: I see, so, even though it didn’t look great at first while you were trying to figure out what the product was, something about it attracted customers and attracted interest, what was it you got right even though the design wasn’t there?
David: Well, I think what was right was an expense reporting product built for the employee, which simply this didn’t exist before, which sounds really obvious, but the reason it didn’t exist is because it couldn’t have existed, And I’d say it’s not that Expensify, had I started a year earlier, we wouldn’t be here today, because it just wouldn’t have worked. Or a year later if someone else would’ve taken it.
But I think as we got into it, we realized there’s two major dynamics expense reporting which created this short window of opportunity that we just happened to be the first to find. The first was that, we were the first people, because we had no intention of actually doing expense reports. We really didn’t care about the expense reporting product, so we made this receipt processing tied to mobile films which sounded really great and everyone loved the idea of it.
The secret was it didn’t work at all because when 2008, no mobile phones had good cameras, they were completely electrical. And our first generation, this is like the iPhone just launched, the app store had just come out, sort of thing. And so, at the time, we were actually building for MMS images through like feature phone.
It sounds absurd now, but that was just 2008. So, we happened to be the only people in the market that had a receipt scanning app that didn’t work because no cameras would actually be good enough to support it. But that didn’t matter because we were just going to demo it and throw it away and no one was going to realize it didn’t work.
But then one day the iPhone got an auto focus camera, so for the very first time you could suddenly take great receipt images on the road, something that no one could have just predicted or anticipated that. But now suddenly this thing that was impossible before became possible and we were, sort of, the first in line for it so we just got inundated by all these users who loved the idea of mobile receipt capture but simply couldn’t have done it before because the technology didn’t exist.
That was the first thing. It’s like, you can’t predict that sort of thing, it just sort of happened. And the second thing is, expense reporting is inherently viral. Every time you submit an expense report you put us in touch with someone more important than you. Like your boss, your [??] department and things like this. But that’s only true because there’s this whole notion called the consumerization of IT where people bring their own device and things.
At that time, that was completely radical. Like in 2007, when my last startup was acquired, it was a fireable offense to plug a Macintosh into the corporate IT. That’s so insane today to even think about but that’s the environment when we started and it was only this, such massive sea shift in the relationship between employees and companies was happening and you couldn’t have built a company knowing that ahead of time because that was just changing.
And we just, all of this happened at the same time, this mobile app acquisition, the existence of an app store that was tied to an auto focus camera in a genre of product that has inherent virulence built into it where you’re always promoting the product directly to the decision maker. All this stuff, it’s like, no one could have predicted any of the most important things about the business and had we asked the experts, all of them would’ve told us it’s impossible.
So I think it’s just, don’t ask for advice because anybody you’d be asking, it’s like, if they’re so smart, they should be doing it and if they’re not doing it, there’s probably a good reason.
Andrew: So, if you couldn’t have predicted it, was it luck that made Expensify work?
David: Sure, but luck, I think the best definition I’ve heard is the combination of preparation plus opportunity. And it’s like luck only works if you’re ready to jump on it.
Andrew: So, you told me about the opportunity as it happened, and what about the preparation that you made that got you to take advantage of the opportunity?
David: It’s the preparation, for example, is being prepared to change and the discussion around design. It’s like, we intentionally didn’t freak out about having the best possible design because we knew that that wasn’t the most important thing at the time. Had we spent forever trying to make the most amazing initial thing and then thrown it away the next day, it’s like, man, that would suck. We probably would have missed our launch window or whatever it was.
And so I’d say the main piece of preparation of ready to have an organization that is able to shift priorities on a dime, to take advantage of opportunities that no one could have possibly predicted.
Andrew: Okay. So what about this: You gave consumers the ability to take a picture with their feature phone of a receipt and MMS it over to you. That blurry picture would eventually get to you. What do you do with it? What would you do with it?
David: Again, we had this prototype expense reporting system which was built entirely for the employee, so it’s incredibly easy. It sounds great now. It’s like, of course your product should be easy. But in reality, it just didn’t work. It just didn’t work for the company because it only handled the employee’s side. It didn’t really work for accountants who didn’t know anything about it. But the thing is, employees outnumber accountants 100 to 1. And so you’re going to have basically a word of mouth product, it has to be based upon the raw numbers.
And so we had a product that when we demo’d it, the demo looked amazing. It’s like, wow, it’s great! There’s mobile receipt capture. There’s this awesome simplified interface. It’s designed directly for the employee. It’s like, this sounds amazing to everyone in the audience, none of which are accountants. And so I would say early on, it was really just about focusing on what riled up that audience, got people really excited about it. Even though in practice, it frankly didn’t work. But that’s okay because you don’t really need something to work to start. You just need to figure out what inspires people. What excites people?
Andrew: I see. So you weren’t even giving this to consumers yet, so they didn’t see that it didn’t work.
David: No, no, no. It worked. It was there. You could do it. I’m just saying that no companies adopted it to start because it just didn’t fit the company workflow. Employees adopted it. They were like, whoa! This is so cool. We should totally use this thing, and the accountants puked on it. Because it was just like, this doesn’t fit any of our processes at all.
Andrew: But the reason that consumers, that users were able to use it in their companies and then bring it up the chain of command is because they could create their expense reports using whatever software they wanted and then they’d submit it up.
David: Well, yeah. That’s the way it happened was employees loved the idea of Expensify. It just sounded amazing. So they created expense reports. They’d submit it to their accountants or their boss and say, “Let’s use this.” And their boss would say, “This doesn’t work at all.” But in the process, they made an introduction to us of the boss, and now we learned precisely what didn’t work.
Andrew: Oh, I see.
David: So we didn’t know. It was like, how do we, it’s like, I don’t know, focus groups or whatever from the start, interviewed accountants and things like this, the product would be wildly different. And I think that’s one of the nice things about entering a space that you know absolutely nothing about and you understand that you’re completely naive, is that you know you know nothing.
And so as a result, you’re not trying to pretend that you know better than your customers how they should do their jobs. And so we approached it like, “Look, we’ll do whatever you want. Tell us what you want and we’ll do it.”
And actually, that’s another nice thing about Expensify is that we support a bunch of really terrible processes that companies should never use. Like, no accountant would ever advise, but in practice are actually used quite commonly.
Andrew: For example?
David: There’s all these different ways. QuickBooks is a horribly complicated product that can be configured or just mis-configured a million different ways. And it’s most often mis-configured. And so if you went to an accountant and said, “What’s the right way to do expense reporting?” they would tell you a certain process and some people do it that way, but more companies don’t. More companies will just export things. [??] properly and so forth. And so we made our product incredibly flexible to support the processes as they existed in the real world, which is far more complicated than as they should exist in the mind of an accountant.
Andrew: And the way you found this was you created a product that got consumers’ attention. They used it. They created expense reports. They sent it up to their bosses or accounting departments. The accounting department said, “This just does not work.” And then you talked to them and said, “Okay. Why doesn’t this work? What are you looking for?”
David: That’s exactly . . .
Andrew: How did they even know how to contact you or for you to know how to contact them?
David: Well, again, I think there’s something really powerful about having employees championing a product. Because they would basically say, “Why can’t we use Expensify? It’s like, Expensify seems like they’re very flexible. Can you figure something out?” In fact, I would say the most important thing… it’s also funny how this stuff works out through pure chance.
It’s like, we had this email system, and it would basically send an email. So the first email is a validation email. It’s like, set your password. It doesn’t happen immediately. It was stylized as beautiful. Everyone ignored it. But then there was a second email that happened, basically, on the hour when we started our servers.
We start our servers at a random time, so this email would come at a random time during the, and it would happen, it would send it to everyone who signed up in the previous hour. Which means that it would happen upon average 30 minutes after you had signed up, but it’s a randomized average which means, and this particular email system can only send a text email. And it sent it directly from my accounts. And then my email that you receive was something very basic like “Hey, thanks for [??] Expensify, let me know how I can help, David. See you at Expensify.”
And the consequence of all of this is that it means immediately after your first experience with the product, roughly 30 minutes later you’d receive an email from the CEO, and you’d look at me like “Well, it’s not on the hour. It’s not exactly 30 minutes after I signed up.” It seems like it’s coming directly coming from him. It’s probably automated, but he just sent me an email. “And so people were responding to this, and they would just respond like, I liked it.”
They would respond with pages, and pages of thoughts, and “Oh, I really love the idea. It could be so cool if you did this. Have you considered this? I’d be happy to put you in touch with my account.” Whatever it was.
Andrew: I see.
David: And in this email, a good newsletter, you know, you might get like, I don’t know a three, like a five percent response rate is great. This was like getting a 12% response rate. And of people who just loved the idea of Expensify, and they were wanted to help us build it to something amazing. Recognizing, it’s like no one knew what this was going to be. And I so I’d say it’s all just about recognizing sort of the sheer scale of our ignorance, and then trying to enlist our customers to help raise that [??].
Andrew: Gotcha, and not sending that email out instantly got people to think maybe it’s not automated, and made it feel more personal, and that’s why they responded.
David: Well even better, a lot of people would say again, it’s like “This is probably automated, but I’m going to give it a shot.” Then when you actually turn around, and respond to one, you have a customer for life.
Andrew: I see.
David: It’s because, it’s like once you have a real conversation going with users, and they see that you’re acting on their feedback, like they will champion you to the end of time.
Andrew: So I’m looking at a early version of your website here where it says, “Here’s how we compare.” And here’s some of the things that you emphasized back then. This is early 2009, card import. We import 92% of credit cards, E-receipts, expenses less than $75.00, receipt import via email, iPhone app. Card import 92%, how did you know that was so important to your users, that that’s the first thing you want to highlight at that time?
David: Well again, I think this came, because we launched the wrong products. And so we launched this prepaid debit card idea, and the idea was our card would feed directly into expense reporting, and people were like, “Wow your card is really interesting, but I would really love to import my real credit card.”
Andrew: I see.
David: Like [??] for expense reports. And we’re like, I mean, I guess like our card is so cool, why don’t you want to use it? But then our cards got shut down, you know like well I guess hard input is the way to go. And so it really just came down to that was overwhelmingly the feedback we got was like, this idea is really cool, but here’s a way to make it a lot better is by importing my existing credit cards.
Andrew: You know David, I’ve gone in one direction in the past, and then been told to go in another direction. And all right, I’m a little tired, I’m excited about the first idea, but fine I need to be flexible go to the second direction. Then people send you in a third direction, and at some point, maybe around the third, or fourth direction you start to think, “Oh this just might not be the right idea.” What was it that kept you going even as you were adjusting your business so much?
David: I think it was just the raw enthusiasm from our users. And I mean, it sounds crazy to say that expense reporting is an emotional product, but it is. It’s like, if you think of all enterprise software out there, like you might think of your payroll system, and you might care about the size of your paycheck, but you don’t really care who gives you your paycheck.
It’s all pretty much the same. And so you don’t really have a lot of emotion tied up around [??] software. But expense reporting is the most demeaning, and humiliating experience you can imagine. People absolutely despise their expense reporting systems, because as you go around, like you’re a high paid employee, and you’re scraping together receipts for like this $1.50 cup of coffee, and you get a thicker pocket, and you get home, and then you spread them all out, you bought your glue stick.
Like a glue stick that you haven’t used since kindergarten, but you have to like you know, assemble this expense report together, and then you got to submit this report, type everything into Excel, print it out, hand it in, and you just extended a zero percent interest loan to your employer, but now you got to be repo man, and sort of fight your way to get paid back.
And so it’s such a terrible experience for everyone involved, and they despise, it’s not just a waste of time, it’s the worst time of a person’s day. A business traveler hates their expense report more than any other work they do in that entire month.
And so when we came to them, and said, “No we’re going to build a project for you, that’s going to be optimized for the end user” which hasn’t been done before, and I think that people responded to it with tears. Like I would go, like literally ever conference I go to, like some will come up and hug me, or be like “Oh my God, you saved me so much time” and it sounds maybe a little cheesy, but like “This is time I spend with my family, because my expense reports were like I had to do them on the weekends before, because I was always traveling.”
It’s like, “You save me so much money because before I wouldn’t even submit my expense report, because it was just so much work, I would rather just eat the cost. Now I’m getting more money, I’m spending more time with my family, and I love it. You make it fun. It sounds crazy for an expense report to be fun, but it can be.
So I think that we’re astonished by just how much just genuine and humble enthusiasm there was for solving this problem. And it wasn’t just like a crazy sort of like bunch of college kids or just the tech savvy. It’s such a global problem. It’s such a main street problem affecting middle America. And I think that we’re just so humbled by the level of enthusiasm for the problem that we’re solving and our solution to it that we couldn’t stop.
Andrew: This first or early version of the site seems to emphasize that the price was zero dollars. You charged nothing at first? Why?
David: Well, that’s funny actually because nothing costs anything. It’s like we had zero marginal cost user acquisition through the mobile app stores. So the major expense that most companies have is advertising. We don’t advertise. Even today we don’t advertise.
So I’d say most companies have a lead generation problem. We have a lead filtering problem. We have hundreds of thousands of companies who have employees who have checked out Expensify. We don’t need more companies. If we don’t sign up another company ever until the end of time, it doesn’t matter because we’ve already had so many of them. It’s just really about converting the companies that we already have.
So I’d say the major expenses that a typical company has, we just don’t have. And I guess I’d say, and this comes down to maybe something that I didn’t realize when I started. Because initially when I launched Expensify, it was like, “This is going to be obvious. Okay we’ve done our [??], now we know how this is going to work. We’re going to raise money. We’re going to spend it on ads. We’re going to optimize until the cost of customer acquisition is less than lifetime value. We’re going to raise more. We’re going to spend more. Profit. It’s going to be perfect.”
But little did we realize, that doesn’t work at all. Like not even close. We raised a million dollars in 2009 and basically just spent it on advertising. We turned around and just tried to and just couldn’t. The main thing, for example, we’re the top organic search result for expense reports. But even having the best possible organic ranking, it’s our number 16 traffic source. It accounts for point one percent of our traffic. No one searches for expense reports because basically everyone knows what they have to do for expense reports and no one thinks they can change it.
Likewise, the few people who are searching expense reports were very high level enterprise customers anyway which we couldn’t support to start. So we tried all these different ad mechanisms and none of them worked. That’s when we sort of launched the iPhone app and realized that we were just flooded with all these employees. And we learned kind of the viral dynamic, we kind of worked up a whole system. We were like, “Wow.”
The most important, we’ve taken what’s typically an incredibly high cost of [??] endeavor and enterprise sales model and made it like zero marginal cost sales. And that changes the entire economics of the organization. But we just raised a bunch of money. So we had like a million dollars and we only had like a couple of people and we had a 72 months runway. So at that time it doesn’t really make sense to kind of focus on optimizing the business model. And the odd thing is the only reason we started charging is because we found charging increased adoption.
Once we had a product that actually worked and companies were like, “Okay, I can see using this.” The top customer complaint was, “How do you guys make money? Because it’s like, I’m about to build my company on your company. I want to make sure that you don’t just go bankrupt.” Or even worse is, “I’m giving you the username and passwords to my bank account. Do you just steal my money? Is that how you make money?” This is a real concern. But it was actually kind of odd, so we were stuck with this.
We were like, “We don’t want to optimize a business model right now. We just don’t care. We don’t need the cash. So we want to be free, but we’re too free. So we need a model that allows us to be just as free as we currently are, but convince people that actually there’s all these bigger companies paying us.” And so we came to this model that’s like, at the time we were going after the ten person company. About a quarter of the company will submit in a given month.
So we’re like, “We’re going to give the first two [??] away free.” Which neatly insures it’s exactly as free as before but then we get to pretend like all these large companies are paying us. But then all those large companies started paying us. We were like, “Oh, well I guess that works. We’re not for the ten person company. I guess now we’re for the hundred person company.” Then the first thousand person company comes along.
So now we deal with customers like up and down the entire market. We have large enterprise customers with multiple thousands of employees. We’re started to talk to companies in the tens of thousands of employees and some of the largest companies out there. So we realized this model that we have, this customer acquisition technique that we have scales very naturally up and down the entire market stack. It is such a dramatically lower cost of sale than anything that’s come before it.
Andrew: What I see when I look at where your customers come from, and I obviously don’t have as much information as you, but I see things like Evernote trunk, which is their app store; Apps.RackSpace.com; iTunes Store. That’s where you seemed, what percentage of your customers come from various app stores?
David: Well, actually, it’s kind of interesting. Seventy percent of our users sign up through the mobile apps, but 80% of our revenue comes from users who sign up via the web. And that’s because the first order user that we get is the employee. And this is Enterprise software; the employee never pays. It’s always free for the employee because you’re a lead generator. We want you to create and submit an expense report because you put us in touch with your decision maker, and then that’s the person who pays.
So yes, most of our users come through mobile. And that’s what actually makes it kind of it interesting. By the numbers, you could say that mobile is completely worthless because none of those users pay. But then suddenly we get this massive word of mouth of all these people just appearing at the website. Because I think it’s something like 80% of the traffic to the website is direct. It’s basically there’s no attributable source whatsoever.
And so this massive word of mouth cloud has got to come from somewhere, and it comes from all the employees. And so I’d say, yeah, mobile’s incredibly important for getting the numbers, but really, it’s the viral word of mouth dynamic that brings in the real paying customers.
Andrew: So a user who hates expense reports will go to the iPhone app store, download Expensify, play with it, use it, send an expense report in.
Interviewer: What do you do now to capture that person who is sending the expense report in to, and get that person to come to your website and sign up?
David: Well, I’d say the way it works is when I submit an expense report to you, an account is created for you automatically to receive and process that expense report. And then you receive an email; it’s like, hey, you’ve got an expense report, click here to approve it. And you’re like, well, that’s kind of cool, I guess. And you click approve and it’s like, that’s great.
Did you know that we can also connect you directly to QuickBooks or your accounting package? We can also reimburse directly through direct deposit and the ACH? And it can offer a ton of functionality for the accountant. But we convert the expense report into a very targeted marketing message to the decision maker. But even better, it’s not just a marketing message. It’s an endorsement from the employee to the decision maker.
Andrew: I see. And you said that you did something to improve the viral loop. What did you do?
David: Well, I mean, it’s not one thing to improve the viral loop. I would say that it is a constant amount of work to always just make that process incredibly clean, to make it such that when you receive an email, you understand what it is. And when you click the link, it does what you expect. It’s always exposing the necessary information to you without confusing you.
And so there’s a constant amount of optimization that happens up and down the entire process. It’s all product development in the sense that our view of marketing and the view of sales is we’re there to support Expensify as it sells and markets itself, and we just pick up whenever it drops. And so we’re there, but the goal is to make a machine that basically grows on its own so that we can head to the beach and then it keeps selling while we’re gone.
Andrew: How goal oriented are you as a company?
David: That’s a fine question. I’d say not. Or maybe a different way of putting it is very focused on just making things better. But the thing is better is not a tangible goal. It’s not like there’s a particular number that we’re targeting. Because if you’re exploring a new space and definitely a new sales model, you don’t know what’s possible.
And so whatever number you pick, it’s just going to be wrong. And either you pick a number that’s too high, it’s demoralizing. Or you pick a number that’s too low and it’s de-motivational. It’s like, just don’t pick a number. Just do the best you can every day with the cards you’re being dealt, and just always aim for better.
Interviewer: How you do you know what better is and what the best you can is then, without a metric?
David: Well, I would say better is just it’s easy to measure better because it’s all relative. It’s like, do you have more users? Do you have more revenue? More customers?
Andrew: I see. Okay.
David: [??] bigger and things like this. But best is impossible. I don’t know. I’m not going to stop until we cover the entire market. Again, we already have customers, some of the largest customers in the world. And so once you can handle some of these incredibly large customers, you can handle everyone. There’s no particular reason why every company in the world can’t use Expensify, and so that’s our target. And so yeah, we’re not succeeding yet, but that’s what we’re going for.
Andrew: I see. So the target is the whole market, but next year you don’t have a goal of getting to ten million. You just say, let’s improve on what we did last year and see how high we can get.
David: Yeah. Because, again, ten is an awfully round number. Why not 11 or 11.2 million?
Andrew: Right. Where did the ten come from? Is it just because it’s handy?
David: Yeah. And again, I think the goals work well in certain situations, like tangible and measurable goals and that is, if it’s possible for you to work a little bit harder or more, to achieve that goal. But if you’re already working as hard and as much as you possibly can, then the goal is irrelevant. Because you’re already doing everything you possibly can. And it’s really more about standards and checking if you’re on the right path. And so, it’s less about the future and more about, checking and analyzing the past.
Andrew: I see. We talked earlier about the App Store, the mobile app store. What about the other app stores like Evernote trunk? How much of your user base comes from those places?
David: Funny story and that is. Immediately after we launched and raised $ 1 million, and concluded that we just couldn’t advertise at all, it just didn’t work. And then right then, Salesforce actually had this competition. Who could make the best exprense reporting application, on top of the Salesforce app exchange? And then we had no interest in using force.com, but we CSS’d everything to make it look exactly like we did.
And we entered this competition and just dominated it. It was great. And so we become this force 40, like top 40 Salesforce application. After that, Intuit just launched, we became a launch partner with Intuit, for something call the Intuit app Centre, which is basically like the iPhone App Store for accounts, [??] QuickBooks.
For a while there was a button inside of QuickBooks, that went straight to us. Because we were a launch partner with Intuit app Centre, now we became a launch partner with Google apps marketplace. And so we were a top expense reporting app there, five stars, more reviews than anyone else in that category, combined. None of those bring anything.
Andrew: Really? No customers or no new users?
David: Nothing, period. Like they can all disappear tomorrow and we would know. In fact, we turned off the Intuit one because it wasn’t bringing us the leads we needed. And so I would say, advertising didn’t work at all. And we’re listed in all different places and were okay.
In fact, I would say, if we did not have the mobile dynamic like the mobile app stores, then I would probably be all about Google apps mark place. I think that one is like, pretty good. But Evernote actually, we had an integration with Evernote, that’s pretty good too. But nothing even compares to the volume of users and companies that we get from the mobile channel. It’s far and faraway.
Andrew: I do see you in those stores a lot. I remember going to the Evernote trunk a lot because I just love Evernote. And I flip through it and I see you in there. I’m surprised that with all that exposure, you still don’t get enough users to get excited about it.
David: It was also like, we are at a certain scale now, that it kind of takes a lot to move the needle.
Andrew: I see.
David: And so I would say again, I think that had those guys existed right when we launched, perhaps we would focus more time on them, we would have maybe optimized it a bit more. But we stumbled into this mobile and [??] dynamic so early, and it was just so much better than everything else, that we just haven’t really put the necessary time into the other opportunities, to really focus on.
Andrew: What about articles written about you, in Forbes, Venture beat, I see sending your traffic. Does that kind of thing help out at all?
David: No. In fact I’ve actually kind of become, not demoralized, but just like uninspired by a lot of press as well. Because for example, in public relations, some of the different PR agencies. They are really expensive. They promise the world and what they deliver is, very, very difficult to quantify.
But if you went to any sort of PR agency and said, how much will it cost to be, to get six prime-time, live television interviews, at the financial networks? Like Fox Business News, Bloomberg, BSkyB, CNBC things like this. So it’s like, you would probably pay a lot for that and you would think that it would be really, really valuable. It turns out earlier this year, we launched a big co-immigration.
So basically, you could reimburse expense reports at Bitcoin. And that came out of it like, we’re growing internationally, international reimbursements options are not that good. Bitcoin is actually pretty good. It’s a great technology for moving money. And so, right when we did this, it was like the very next day, Bitcoin just took off. I don’t know, how much we were associated with that, but I do know that, we were associated with that, in the minds of the mainstream media. And so, as a result, since then, I have been on television, on all these different networks again and again.
I debated Howard Dean about, whether or not, Bitcoin should be accepted as campaign contributions and so on. So I was just up there the other day. Every time you get on TV, nothing happens. There are no tweets, there is no massive spike of traffic. Every once in a while, someone will mention us. Like, “Oh well that’s cool, I saw you want CNBC. Yeah, that’s me.” But it doesn’t really matter. And I say that again and again, you always hear about this sort of, silver bullet that someone else has. Like, “We got on TV and then it was amazing.” Or, “We got featured in the app store. It’s amazing.”
We got featured in the Google Play marketplace. That one day screws up all of our charts. Because now every day, every chart has this huge spike on that one day of massive signups, none of which converted or stuck. So I’d say, there are no real secrets to this. There’s no one thing that’s going to make everything explode. It’s just about trying everything, not losing too much money on experiments, making sure that you’re there for the long haul, and just outliving your competition.
There’s a bunch of guys out there that started right around us and they’re falling like flies. So I’d say, while we keep growing. I think it’s because there’s a lot of classic advice about how to build a startup, but so much of the advice that you hear about being a startup is not about how to build a viable business. It’s about how to sell to the bigger sucker. It’s about how to build, pump and dump something and then get out before the music stops.
Andrew: So if you were to give advice about how to build a solid company, what would that be?
David: I wouldn’t give advice. I’d say just stop asking. Just start doing what makes sense to you. If you’re an entrepreneur, you’re an entrepreneur because you think you’re smarter than the next guy. So why turn and ask the next guy for advice? It doesn’t make any sense. So just do whatever you think makes sense. You’re probably going to be wrong a lot. But every once in while you’re going to be right. And maybe you’re going to be right about a couple of things that no one else noticed and that’s going to make all the difference.
Andrew: What are the couple of things that you’ve been right about in the last couple of years?
David: Well let’s see. I’d say maybe one is, so we had this receipt scan technology called Smart Scan. So basically you take a picture of the receipt, we read all of the information off of it, and then we’ll automatically link it to your credit card. It’s a great technology. But the dirty secret of sort of mobile OCR is that there’s always some range of images that basically can’t be picked up. The lighting’s bad, it’s blurry, whatever it is. The human eye is still very good.
So we had a system of people, transcription workers, that we’ll basically fall back, if all of our systems failed, there’s always someone standing by to enter it in. That’s what gives it incredible accuracy. Incredible accuracy is very, very important. But it does add a marginal cost to that feature. And so as a result we’ve always toyed with the notion of should we just give away unlimited smart scans for free? I’m like, “We could. We could eat the cost.” But it’s actually not an insignificant cost.
It scales because consumers who don’t pay for Expensify actually scan far more receipts than businesses that do. You can do it on the consumer thing, you can scan 100 percent of your purchases. But if you’re a business user, you only scan a fraction that you want to get reimbursed. So we actually opted not to make it free unlimited. We always think about it. We always go back and forth on it.
One of our competitors came out. A company called Lemon. And they launched with free unlimited scanning. We were pretty concerned because they’re basically like the anti Expensify when they launched. First iteration was this gorgeous design. Beautiful, beautiful app. And unlimited receipts, and furthermore they just paid through nose on customer acquisition. Always at the top of the charts and things like this. And they raised a bunch of money and they came out with like a good management team. Things like this.
So they were a real concern. We were really wondering should we just eat this cost in order to compete more effectively with Lemon? We decided not to. We were like, “You know what? We just think that’s a bad business model. So we’re just going to stick to our guns and do what makes sense for us.” And I don’t know, maybe they can make it work, maybe they can’t. I have no idea. It ultimately ended up, Lemon went through a variety of pivots. They actually started charging for their receipt scans and eventually, I don’t think they do it anymore. But then they switched over to doing something else. Doing some Bitcoin stuff. They just got acquired recently by Life Lock, an entirely different product.
And I think it was one of these sort of tough calls at the time where it’s like, something’s happened. How do we respond to it? And there’s no right answer because no one could possibly know. And they might have been right. Who knows? But it turns out that I look back on that as one of the kind of tough calls, that I feel good about.
Andrew: I get that. I see people over your shoulder. And I also see a really cool phone booth where I guess someone can go and have a quiet conversation. Hiring. You’re here in San Francisco where people get showered with money and lunches and all kinds of other benefits. You have an interesting way of competing with that and still bring in new people. I want to talk about that. How do you do it?
David: Well, I would say the main thing is that we just don’t hire a lot of people from around here. Not to say that there aren’t great people in San Francisco. But if they’re looking around for a job, they probably aren’t that good because the best people already are so overwhelmed with so much opportunity.
And so we don’t really do a lot of kind of aggressive recruiting. We don’t poach. Because the people that you poach generally aren’t the people that you would want anyway. Like the best people are really committed and really focused. And so I’d say most of our hiring frankly happens from middle America, a lot from Europe, we’ve got three guys from France. We’ve got Venezuelan, we’ve got Australian. We’ve got lots of people from Ohio, Michigan, Florida, Pennsylvania.
Andrew: How do you find them?
David: There’s no one way. In fact, we recently did kind of an audit. It’s like, “Hey, let’s figure out where everyone came from.” There was no pattern. Which is depressing because it’s hard. It’s really hard finding good people. And so as a result we hire really slowly. We’re a 26 person company right now. On a good month we’ll hire a person. On a great month we might hire two. But I would say we hire very, very slowly.
And it’s because finding the right people is just incredibly hard. I mean, we can hire. Actually a comment you made earlier about the money, we have the money. We hire as fast as we possibly can with the constraints of the sort of person we’re looking for. And we would hire a bunch more if we could find them.
Andrew: So it’s not the money that’s keeping you from hiring locally? I always thought it’s because you guys are not flush with venture funding and you need to be more careful. So it’s not the money. So why don’t you just go out and hire people locally?
David: I would say, again, the best people aren’t looking for jobs here. Or rather, I’d say, or I’ll answer it this way. The sort of person we’re looking for is just a really awesome generalist. Someone who basically can do everything. Someone who typically started programming really young. Middle school, you know, I started when I was six. And someone who’s done a wide variety of things.
Say they can do front end, back end, and mobile, whatever. They’ve been programming so long that the programming itself is just no longer a challenge, but they went to college anyway. So people who generally come from kind of humble back grounds, they want to work hard. They’ve heard the story of Silicon Valley. It sounds amazing. They come with this level of optimism and such an enthusiasm. And they come from everywhere.
And I would say that the challenge however with this person is that they have incredibly fast career trajectories. So you have to catch them very, very early. Because after even just a couple of years it’s like they’re not going to anyone for a job. They’re starting a companies or they just have the pick of the litter. So they’re not just asking around.
To be clear, we’ll hire people locally if we can find them. But it’s just very hard to find them because the right people already have so much opportunity and they don’t really need anybody. They don’t need us, they don’t need anybody else as well.
And so we typically hire, I would say, right out of college and generally someplace where they are amazing and they are excited about moving to San Francisco and they have some sort of dream in their own personal life. They not just Expensify, not just a job, not just a startup job, but the next step in the big thing they want to do in the rest of their life.
So when someone comes to Expensify, it’s not just because for a great salary or great compensation and all that stuff which we do, but it’s because I see what you have here. I see the sort of people that you’ve hired and no other company has this. I’ve interviewed all over the place. I can get a job anywhere, but I really want it to be with you. Why? Because I want to be surrounded by the sort of people that you’re hiring. And I want to learn how the techniques and the strategies that you’re using because I want to go out and do that again after you.
Andrew: For their own company. They’re entrepreneurs…
David: Yeah, I would say, basically everyone’s an entrepreneur here. Everyone has some dream that they want to pursue. It’s not just about like I want to get a job and just ride it forever. It’s not even about I want to get a job and make a ton of money for its own needs. It’s like, I want to make a job such that I can make enough money so I can go an make a company after. But…
Andrew: So how do you keep someone focused on your stuff when they’re going through that?
David: I think the key is because our stuff is the next step in their life’s ambition.
Andrew: I see. That being focused on your work, on Expensify, is going train them to do what they want to do next.
David: Yeah, because again, it doesn’t cost anything to start a startup. Anybody can do it. So it’s not the money. In fact, I’d say, increasingly I think that there is sort of a pattern of taking less money later and less frequently. And I think that any more anybody can start a startup. It just takes a laptop which you have. It takes time which you have. Like if you can afford to go to school, you can afford not to go to school and just hang out in your basement and program.
So I’d say, what you need to do to start a startup generally isn’t money, it’s just sort of confidence and awareness. It’s a belief that you can do it and it’s surrounding yourself with a sort of positive sort enthusiastic people that can give you, sort of inspire you to actually you do it.
Andrew: What do you do to maintain your confidence? You come across – I’ve been watching you in this interview. You know what you’re talking about which so many others do too, but they don’t have the confidence in what they know. They don’t have the ability to communicate what they know the way that you did here. Where does your confidence come from?
David: I guess, probably it comes from having sort of had an inferiority complex for most of my life.
Andrew: Where did that come from?
David: I think it’s maybe I’m from the Midwest. And I guess more importantly when I grew i[, when I started programming, I didn’t know anybody else that programmed. And so literally like middle school and high school actually. I wanted to go to a local community college to take a programming course because I literally had no idea if I was any good.
And so when I got to that class and this is the first programming course I’ve ever taken. the teacher was like, “Look, you should be teaching this class.” Or making jokes like this. And then eventually that’s when I learned that you didn’t actually have to go to class, you could just take the test. So, oh my God, college is amazing.
I think that there’s something really… Again, I don’t know if it’s a Midwestern thing or what it is. It’s a non-Silicon Valley thing. It’d be kind of isolated and to really love what you’re doing but to not really know how to compare yourself and contrast. I think that’s a common story behind a lot of people here. People who have been doing it for so long but just really not knowing if they’re any good. But thinking they were but really wanting a chance to prove themselves.
And so I think that throughout my whole career I’ve always been moving between positions, and I always felt like, man, I see all these really high [??] executives out there. I feel as entrepreneurs they’re must be something I’m missing. It sure seems like I could do that. It seems like it’s not as hard, or you’ll talk to them and they’ll mention their degrees. They mention all of this, advanced analysis and it sure seems like whatever they’re doing they must be putting a lot of time into it. I don’t know. Maybe, I’m just naive.
Andrew: When are you doubtful?
David: When am I doubtful?
Andrew: Yes. When do you ever question yourself or feel like maybe you’re not ready to do this?
David: Well, I would say that I was continuously doubtful until I decided to do it and that what really helped my last company, Red Swoosh, was founded by Travis Kalanick. He’s the founder of Hoover. And so Travis and I were basically doing this last company together, and I think it was just really watching him go through it. Seeing him do it and like, you know what? I think I can do that. I feel like I could be doing this, too.
And so I think it really comes down to, and I think that’s why people come to Expensify is because not for just good pay, not just for our perks and things like this and the products and all this. But it’s because this is a stepping stone. The way I describe Expensify, I loved Expensify to be, is it’s a university without teachers. It’s people who come here who want to learn, who want to teach people around them. But who want an opportunity to kind of go and do some amazing things in their lives. This is a very hard opportunity to find.
Andrew: How does that month away from San Francisco and away from the office factor into it? What do you guys do that month, and how does it factor in?
David: Got it. Got it. And so every year we take the whole company overseas for a month, and we’ve done it every year. And it’s interesting. It’s really hard to describe. I would say like the first time we did it actually was because we were between offices, like we [??] our last company, Red Swoosh, again. We had an office leased that was finished. We had another one that was going to start. We had a month between. What should we do? What coffee shop should we go to?
Someone was like, “We should go to Bangkok. Why not?” The Internet goes everywhere. And so, why can’t we? I’m like, “Okay, I guess. And then we realized actually it’s cheaper to be in Bangkok than we’d be hanging out here because we don’t have an office here and so forth.” First, it was based just for fun. And then we realized it’s such a fantastic way to get to know your co-workers in a way that you simply can’t in the office because [??} away from everything you know, you don’t speak the language, you’re in a foreign culture.
And it’s hot. It’s dirty. It’s grimy. Often it’s uncomfortable, You’re forced to be packed together in some train in the middle of the night, and the power ran out a long time ago. And all you have is like a couple bottles of whiskey. It’s like, at that time you start to have conversations and there’s time to talk about things you would never talk about otherwise.
And so what I think we found is that it sort of puts people into this very different frame of mind, and this different frame of mind is an incredible creative one. And I think our best ideas always come from these trips, and it’s what powers sort of the next year, if you will.
I mentioned that we did this Bitcoin integration. That came out of one of these trips basically. We should absolutely do a Bitcoin integration. It sounded like a crazy idea at the time and now it’s put us on TV [??].
Andrew: And you do it there while you’re on this trip?
David Yeah and so what we typically done is we picked some sort of arch project that involves a majority of the team.
David: That can be done in a scope of the [??] such that everyone is just really focused on working hard, working together and working on this really difficult and creative thing and then trying to get it done and in the past we’d try to ship it before we launched but then we realized shipping major new features right before hopping to a plane for 12 hours is not a great idea. So now we ship [??] but no, it’s been great. It’s been really awesome.
Andrew: All right, there are two things that I promised at the top of the interview that I want to make sure to include. The first of the two questions is the easy one. How do you keep clients paying month to month? Basically, they’re business customers as long as they’re using your tool and it’s an integral part of their business, they’re going to continue to pay, right? We’re not talking about consumers who are watching every penny.
David: Oh and really, exactly. Like and retention is going to be high. In fact, we have let’s say it’s really odd. We have negative revenue chart meaning that basically every past cohort pays us more today than they did then and so and it’s even after the few customers who drop out and so yeah, customer retention is incredibly high and revenue retention is perfect.
Andrew: What about then walking away from a funding round? Why did you even look for funding if you guys weren’t using the money that you had and you’re profitable, right?
David: Yeah, yeah, we are and it’s well, well, actually interesting. It’s hard. It’s just because it’s what you do as a startup. Like, you just always feel like the next step is like you go raise more money and I think [??] just kind of fell into this habit like, things are great. Investors are hounding us.
We should totally go raise money and like and then we’ll figure out what to do with it because certainly there’s something great we could do with this money and [??] . . . but oddly enough like, right when we got to this round that’s when like kind of the enterprise really started opening up for us.
Like, very large customers started coming to us and we realized is like, wow! You know, we actually . . . we don’t . . . a lot of the stuff we thought we were going to do with the money we’re like, well you know, to sort of build the enterprise sales force and to do a bunch of enterprise integrations and a bunch of the stuff. It’s like, we’re actually already doing that and it’s not really that expensive but I think really it sort of came down to the more we got into it we realized you know, we don’t have a good idea what to do with this money.
Just because we can get it doesn’t mean that we want it and in fact, I think the more we got into it we realized we didn’t really want it because taking money is not just putting money into your pockets. It’s making a commitment to spend that money and it’s [??] to the investor who’s investing your growth and you’re basically selling the assumptions like, if I had this money, growth is going to, you know?
We’re going to do great things with it and as the more we got into it, the less confident we were that the money was actually . . . the plan that we had at the time was just really the important thing and I think that we realized sort of going through it it’s like, if we’re going to go raise money, we should be doing it because we have a very specific objective that we can’t fund through revenue and that we’re confident it’s going to return results and we just didn’t really meet those criteria at the time,
And so not to say that raising money’s not bad and we’ll absolutely do it in the future when it makes sense but I think it’s . . . that was sort of the time when we realized that there’s more to being a startup and maybe the difference between sort of a startup and the business if you will.
It’s like a startup is always just kind of like chopping off parts of its body that eats and so eventually like, you know? You shrink and shrink and maybe you hope to survive but really we’re like, oh, no. We want to start growing and paying our own wages such that investment is just about growth and it’s not about survival and it changes the entire company to recognize that like, we pay our own way and so when we talk about spending, it’s talking about basically like, should we hire someone like this or should we do this other thing and it makes it much more tangible or should we just give ourselves raises?
Like, that’s another option too and so it’s interesting having everyone really focused on understanding the importance of revenue, the understanding of viable business and doing things that are quite reasonable versus just blowing up some investment money because we have, because we’ve got it.
Andrew: So, the first couple of sentences that I said to introduce this interview is . . . said, you recently walked away from a funding round and then the second sentence was about the surprising thing that you did instead. The surprising thing was you became profitable. You announced actually that you were profitable, right?
David: Yeah, well . . .
Andrew: And that’s because you said, if we’re not taking this funding and we don’t need to go in the direction we expected, why don’t we become a business that lives off of its profits and revenues.
David: Yeah, well and I think those would . . . Yeah and I think that’s what’s the interesting thing. That was a time when we realized that we actually can be a business and that you can actually just make money and that you don’t have to just keep losing money forever to be a successful business and I think that . . . Yeah and so I’d say it’s been a great year.
It’s a difficult year because we already do it for example. Like, we knew we could become profitable but we weren’t at the time and so we’re like, all right guys. We have to pull together. We’re going to trim back salaries. We’re going to cut some extraneous spend. We’re going to do a variety of things. We’re going to pull through this. And then over time, basically, they could see as we’re plotting our path out of, basically, this is our burn, this is where it needs to be. This is where revenue needs to increase and costs need to go down.
And having everyone sort of very focused on the actual tangible mechanics of the business was incredibly illuminating. I think that it provided a huge degree of focus, and it’s made everyone so inspired around the company. So then when we actually announced, it’s like, guys, we did it. It’s like all that 15% that we cut, that’s like we’re paying . . .
Andrew: And they took 15% cuts?
David: Fifteen percent cuts, but then we paid it all back. It was like, yeah. So its like, look, we basically paid everything back so it’s just like we’re square. Now we’ve got raises. And we’re starting to, we had perks and do all this stuff, and it feels so much better to know this is the result of our hard work. And that’s just because we just sold some equity.
Andrew: I know you said earlier getting press isn’t very effective. I know that this interview is not going to move the needle for you. Hopefully, someone is going to listen to this on their way over to work, but it’s not going to move the needle. App store’s where it’s at for you. But now that you’ve done this, what do you think?
David: Well, actually, I would say press is not effective for acquiring customers. Press if very effective for hiring. In fact, I would say if there was any pattern as to where the best candidates came from, it was because they’ve read our blog. It’s because they saw something on the road or some podcast. Maybe they even saw some TV, though that hasn’t happened yet.
Because again, the best people out there, they’re not looking at job boards. But it helps talking to a recruiter, certainly. They just approach the companies that they love and they say, “I know you’re hiring because every great company is hiring. And I know you want to hire me because I’m really great. And so let’s talk.” And so I’d say, “I think that, actually, this conversation has been great.” I would hope anybody who’s interested in something, anything that we’re doing, we’re always looking for amazing people and they’re just incredibly hard to find.
Andrew: What’s a good way for them to contact you and say, “Thank you for doing this interview,” or . . .
Andrew: What was it? I’m sorry.
David: David@expensify.com. I’m very easy to find. For jobs, Expensify.com, anything ending with expensify.com will ultimately end up probably to one of us.
Andrew: That’s a great way to put it. Thank you so much for doing this interview. Of course, you guys know the website is Expensify. Thank you for being a part of it. Bye, everyone.
David: Thank you so much. It’s been fun.
Andrew: Thank you, David.