Andrew: Hey there, freedom fighters. By now you already know that I am Andrew Warner, founder of Mixergy.com, home of the ambitious upstart.
Are you a mission driven entrepreneur? Josh Reeves sold a company that was already successful because it wasn’t fulfilling enough for him. He’s a mission driven entrepreneur. Today he runs ZenPayroll, a modern payroll solution that he co-founded about two and a half years ago.
I want to find out why ZenPayroll is so fulfilling for him. Why he has to have a mission and fulfillment? How you can build a successful company even when you have a purpose beyond just making money? And then find out how this young company under two and a half years old is already processing about $400 million in payroll per year, actually over $400 million in payroll per year. I see he’s nodding. Yes, it was important that we say not about but over. He succeeded it, and we’ll get into all that.
Thanks to Scott Edward Walker of Walker Corporate Law. He is the entrepreneur’s lawyer, and I’ll tell you more about him later. For now, Josh, welcome.
Josh: Thank you. It’s great to be on the call.
Andrew: The company that you sold because it wasn’t fulfilling was a successful company, as I said. It’s called Unwrapped. What did Unwrapped do?
Josh: Ah, yes, it definitely requires some background to understand why I went into entrepreneurship in the first place, but to answer your question Unwrapped was the product inspired by my friend at Zazzle. We were focused on helping small businesses tap into Facebook and Twitter.
We started the company in 2008 whenever everyone’s Facebook platform was launching, and at that point in time you either had to spend $25,000 and hire someone to build a Facebook app for you, or you hopefully had a brother or sister who knew software engineering. We thought there was an opportunity to help these small businesses leverage this new channel, and we wanted to create a product to do that.
Andrew: You know what? I interviewed now a handful of entrepreneurs that did that. They all did incredibly well. You did exceptionally well, $400,000 a year in sales. Is that right?
Josh: Yeah. Actually when we quit our day jobs, my co-founder had been a classmate at Stanford, and he had been working at Google for four years making almost $1500 a day in revenue.
Andrew: By the time you quit $1500 a day in revenue?
Josh: Yeah.
Andrew: Okay.
Josh: And it was basically again this publisher platform. It was a way for anyone non-technical to go build an app by using Blogger or WordPress on Facebook or Twitter. We were helping small businesses and anyone that wanted to go build an app on Facebook.
Andrew: So then what did you do well there? How did you get to grow, beyond the fact that you jumped in at a time where this tool was necessary? Why you? Why did you do well?
Josh: Yeah. I think also well is a relative term. I’d like to give you some background on why we started that business. To me when I say entrepreneurship {cuts out audio] I studied electrical engineering at Stanford. The heart of that is a desire to solve problems. And for me personally it’s understanding how things work, how they could be made better, but really never accepting the status quo as a way that things should be, always wondering how they could be.
And so in this case it was very much a belief that this was a pin point. We wanted to use technology to do something that I believe in as a way to gain leverage. I helped more people to go really solve this problem for a large community. And the reason why it grew very quickly is because that, again, it was a product that was in demand.
It was kind of the heyday of Facebook platforms, and there was a lot of virality at play. And one thing that I think we learned from that experience was we were very focused on the next day, the next week. It was very short term in our thinking. We just kept doing what was working. When you’re making $1500 a day, it’s just two guys working out of your apartment, it sounds like things are working.
But really you still have to wonder, at least, in my position where are you going? Where is the ultimate objective? Where is
? And that led to some of these decisions made later on in the business and why I’m not as involved today.
Andrew: Couldn’t you find a place for it to go? Couldn’t you say, “You know what? Yes, this is not enough. Yes, it’s relatively okay, but not really as big as I’d like to get.” And then grow it to where you want it to be and add more to it.
Josh: Yeah. I think, to take a step back, there’s a lot of reasons to start businesses and a lot of reasons why entrepreneurs decide to take this plunge and dedicate their life towards solving a problem. And there’s no single formula for that. I like to use the word “authenticity.” I think each person has to find what’s authentic to them. And so in the case of building Unwrapped and our product, Buzio, again, it was working with someone who I loved working with. We had a few teammates.
Fast-forward, we were about two years into the business. Had several folks on a team. And we were actually almost done raising our seed round of funding that would have helped us continue to scale and take the business to the next level.
And during that process, I spent a lot of time thinking about how I was spending my time, and if I was authentic to this business. And I think it’s very much a personal choice. I’m a very… when I say “mission-driven,” that means that I’m creating a business to solve a problem, not solving a problem to create a business. And so the heart of that for me was figuring out, could I see myself spending two, three, five, ten years building this company, and really believing in this problem?
And I like to give the advice to folks: if you can’t imagine yourself talking about what you’re doing 10,000 times, on that 10,000th time, if you’re not going to be as passionate and enthusiastic and honestly, transparently, sincerely excited about it, then it’s really not the right business to be focused on. Because you’re going to talk about it way more than 10,000 times.
And the insight I had was that I really didn’t feel authentic to that business and that mission, the problem, at that point. No judgment on the space. I think there’s lots of value to be created. I felt it was becoming a little bit too fluffy. And I realized that…
Andrew: What do you mean by “too fluffy?”
Josh: I mean that we were selling a product to our customer, and frankly, a lot of it was freemium, so they were using it and really benefiting from it. But the value that I thought we were providing — again, for our product, for our business, not the industry at large — I didn’t feel like was changing their life or transforming their life in a way as much as I would have liked. And…
Andrew: So when you’re saying you were trying too much to get virality and revenue, and not enough to create meaningful products that solved problems and people wanted to use 10, 20 years into the future.
Josh: I think we were very focused on solving the underlying problem, and that was all I spent time thinking about. That’s frankly why I went to Stanford in the first place, and much of my life is focused on, given the wonderful choices that we have and how grateful I am to have those choices, how do I make sure my time is being spent on meaningful activity.
So we were very focused on helping our customer, and a lot of them were really benefiting. But I didn’t feel like it was something I’d be spending 10, 20 years working on. And I think someone [??] okay working on something for a few years, and then…
Andrew: Flipping it?
Josh: Flipping it. And I really, by reaching that conclusion, won’t spend a day [inaudible 02:59], because every day when I’m hiring someone, when I’m taking funding from someone, when I’m communicating to our customer that we’re here to help you, I either need to believe that inherently, and believe it to my core, or if I don’t, then I’m not authentic to that pain point.
And so it wasn’t, I think, us overly focused on things that didn’t matter. It was just a realization that there were other problems that I felt like I could make more of a difference in, that I could be more authentic to this in how I was [??] myself. And once I made that realization, even though we were almost done with funding, I immediately stopped that process. And we had…
Andrew: Stopped getting funding.
Josh: Well, we had a couple of folks make offers for the business. And that’s part of what created this conversation, was did we want to finish the funding? Like I said, we were about 85, 90% done in raising the capital. And we hadn’t yet accepted it, right? When you’re fundraising, you have allocation, and then you basically say, “Now we’re done,” and then everyone sends you money. As soon as we realized, and I realized, that that was not going to be authentic to this pain point for the long-term, we decided that it was going to be the best path to sell the business.
And so we went down that path. We had several offers for the company. You know, there’s a fund negotiation process there that’s always… you know, for me it was the first time to understand how [??] value of the business.
Andrew: What did you sell your business for?
Josh: So the amount is not disclosed. But it was a really, I would say, great return on two years of hard work. And then…
Andrew: Was it more than $2 million?
Josh: It was a lot of big fish eating small fish. Our business was actually acquired by another business, and then I worked there for a year before that business was acquired, and then they were acquired. So now it’s actually part of Adobe.
Andrew: Adobe. By the way, speaking of doing things right, I’m seeing that the connection isn’t as solid as it usually is. Let me suggest this. Glen, the founder of Ecam, offered, because he’s a fan of these interviews, he said that if we ever have an issue like this, where the connection isn’t strong, he will buy a copy of Ecam call recorder for the guest. And we’ve only had this happen once a month. But can I give you a copy of Ecam Call Recorder so that you can record your side of the conversation, and then we’ll piece it back together, and we’ll have a cleaner copy of what you’re saying?
Josh: No problem at all.
Andrew: Okay. And you’re on a Mac, right?
Josh: Yes.
Andrew: Okay. All right. I get it, but I don’t get it. I get, Josh, that you’re not feeling it. I would feel it, and I would find a way to grow it, but maybe I’m also thinking too small.
Let me ask you this one last question about it before we move on: did it make you a millionaire?
Josh: So like I said earlier, we’re not disclosing any financial details on the acquisition. But I really want to emphasize, it’s really important in my view, when starting a business, to choose something that you really believe in, and that you’re authentic to, and that you can really imagine, if you’re a mission-driven entrepreneur, spending a large part of your life solving.
Because starting a company is always hard. And I think many people that try to start a business for the sake of starting a business realize very quickly that it can be very stressful and daunting.
In my case, I can’t imagine doing anything else. The opportunity to work with really smart people, using technology to gain leverage and impact many other people in a very positive way, to me feels like a gift every day.
And in the case of my previous three start-ups that I’ve been a part of, and different ventures that I’ve began, each has been a really important learning experience. But in terms of starting Zen Payroll, we have a very long-term horizon. I say that I plan to spend and hope to spend 50 years building this business into its full potential. Much of that viewpoint has been influenced by the experiences I’ve had over the past several years.
Andrew: You were mentioning three start-ups. The company you were with before was Zazzle. Is that the start-up you’re talking about?
Josh: Actually, my first entrepreneurial endeavor was a non-profit I started in college.
Andrew: Okay.
Josh: Called TECC, Technology and Education Connecting Cultures. I joined Zazzle after college as, I think, the eighth or ninth employee, and was there for two and a half years, until it was about 150 people. But I didn’t start Zazzle.
Andrew: Okay.
Josh: I was one of their early hires.
Andrew: You know what? A lot of early hires try to do interviews here calling themselves the founders, and I was just trying to get a sense of, does Josh think of himself as a founder of Zazzle, or is it one of those things where that’s where you consider yourself one of the founding team, or I don’t know what? That’s why I asked.
Josh: Yeah.
Andrew: But I see you’re a do-gooder at heart. Why a do-gooder? I’m looking at your background. You’re not a guy who’s flush with money, flush with opportunities, and feeling like, all right, I’m all taken care of, it’s time for me to go help the world. Where does this need to help other people come from, then?
Josh: Yeah. I just really want to clarify: I’m definitely not a founder of Zazzle. I have a ton of respect for the Zazzle team.
Andrew: Yeah, no, I got that that’s what you were saying.
Josh: Yeah. I was speaking about the non-profit I’d started back in college.
Andrew: Yeah. So the non-profit, and this need to do good in the world with Zen Payroll. I got excited about the size of Zen Payroll before we started talking, and you kept getting excited about the mission of Zen Payroll.
Josh: Yeah.
Andrew: I would get excited about the number of customers you have, and you kept getting inspired by the culture you were building. And so, yes, of course I’m going to talk about all of that. But I’m trying to get a sense, Josh, of where this comes from in you. Most young people don’t aspire… well, maybe actually they do. Maybe it’s… is that the thing, that when you’re young, you want to change the world, and that’s where this need to create a non-profit came from?
Josh: Well, I think there’s definitely a connection. I mean, a couple of different questions there about motivation and kind of mission…
Andrew: Yeah. Help me understand your motivation.
Josh: To be very clear… yeah, with Zen Payroll, we aspire to build a business that can really enable people to, A, make it easier to build a company. I mean, much of payroll today is this very cumbersome, very much a hassle, lots of compliance. A third of small businesses get fined every year for making mistakes.
And much of our inspiration when starting the business was realizing that it doesn’t have to be that way. I mean, since I was very young, seeing unnecessary complexity or unnecessary pain has always bothered me, because if I feel like there’s a way to make that better, why not? Why don’t we take action?
I think, like I said earlier, the heart of entrepreneurship is a mindset where you never accept the status quo as the way things should be. You think about how it could be constantly. And I think that’s almost a personality bias. I mean, that’s not something I turn on or off. When I help other entrepreneurs, when I mentor younger students, when I invest in other companies and/or the business that I’m building, Zen Payroll, which is my primary focus, it’s all driven by the same mindset, which is very much an opportunity to go create something of value.
And in 40 or 50 years, if we achieve our goals, I could care less if my name is associated with Zen Payroll. It’s not about personal ego or some kind of…
Andrew: But can you…
Josh: …long-lasting legacy. It’s about really trying to solve the problem. And that’s what makes me proud every day.
Andrew: Do you have a memory back of your childhood of a time before Zen Payroll, where you realized, “I’ve got to do good in the world?” Of a cause. Do you know the cause of this spirit that you have?
Josh: Yeah. I think…
Andrew: What is it?
Josh: Just to really clarify, too, I think there’s… I’ll share that story in a sec. But it’s not… I don’t think you have to make this choice on do good or build a business. I mean, capitalism is this wonderful construct that basically says if you can go solve a problem for a customer, they pay you for solving that problem, and if you can find enough customers, you have enough revenue, and you can hire enough employees, and you can build a business. And if there’s enough people that need you to help them with that problem, you can build a huge business.
So I think of the two as intimately connected. Doing good, solving a problem, building a huge business that can ultimately go public…
Andrew: Mm-hmm.
Josh: …and be worth tens of billions of dollars, to me are intimately connected. I think the motivation is what’s different, depending on the reason why someone’s building a business.
But to get to your question, one of my biggest inspirations is really my mother. She came to the US when she was 18 from Bolivia, really with no resources, no money. Came here to go to the University of San Francisco, study school, learn English, really make a new life for herself.
And when I was growing up, that being a reference point, on taking action. One of our core values — we have six core values in the company — is we are all builders. It really means take action. If you see something that you have as an opportunity, go make the most of it. And I was raised in an environment where I feel grateful every day for the sacrifices that my parents made, like…
Andrew: Do you have an example of that?
Josh: The sacrifices they made? Well, I mean, both of them moved away from their families. So my mother came from Bolivia to the US when she was 18. My dad actually grew up in a small steel town outside of Pittsburgh, Pennsylvania, and came out to San Francisco for his master’s. So it was only the two of them out here. I have one brother. So the four of us, sometimes we call ourselves the West Coast Reeves, to kind of…
Andrew: Okay.
Josh: …demonstrate the [??]…
Andrew: I see. So because she was willing to leave her family, leave her homeland in South America, and come to the U.S., you got the sense that it’s worth sacrificing for a bigger mission to progress in life.
Josh: I think it’s more the mindset of when you have an opportunity, you want to make the most of it.
Andrew: I see.
Josh: I don’t think… everyone can interpret it in different ways. I don’t think it’s a single formula for life. There’s many reasons to live, and many ways to live. But in my case, when I see opportunities, and even responsibility. I talk to the team about this. You can think of responsibility as either empowering or overwhelming. I choose, I think like most entrepreneurs, to be optimistic, because that’s my inherent bias. I think of the things that we’re going to be able to accomplish.
Right now, we serve a number of companies. We have almost half a billion dollars going through the system. But I think about the days when we’re going to have $50 billion, and $100 billion, being processed through Zen Payroll, and we’re able to help tens of thousands, and then millions and millions of small businesses and employees feel more connected to the work they do.
And that’s obviously… a lot of hard work is going to get us there. But to me, that’s as real as drinking a cup of water, or seeing my girlfriend every day.
Andrew: I get your mission. If I seem a little bit pushy here, it’s because I’m trying to get the story behind it. I understand that you’re mission- driven. I want to hear about… like, we all understand that Steve Jobs cared obsessively about details, but it’s not until we heard the story of his dad and him painting a fence, and looking at the back of the fence, and making sure to paint it just as cleanly as the front, that we started to understand where he got his eye.
When I’m pushing for a story about your parents, and a story about where this sense of mission came from, it’s not to trap you, or to get too much in your business. It’s to understand what makes Josh the person that he is. And the more we get into stories, the more we get a real look into who you are, and then we get an understanding of your mission without even being told it. It just kind of comes in.
For example, when we talk about why you got into ZenPayroll, it had something to do with Paychecks, a service that you used. Can you talk about what happened when you used Paychecks in your previous business?
Josh: Yeah. I think this is a really good transition to actually one of the questions you asked earlier, which is about my previous start-up. Much of the lessons I learned from that experience influenced why we started ZenPayroll.
Andrew: Mm-hmm.
Josh: So to kind of fast-forward a bit, but still obviously two and a half years ago. What really catalyzed the creation of ZenPayroll… it was three founders. We came together because of shared values that we had, and it was six core values that we’ve… obviously I’ve mentioned them a few times. I’m happy to go into.
Andrew: No, no, no. If you list them, no one believes them. But if you tell an example of how those core values formed, we’ll all buy into it and understand you better, and see that it gets put into practice. So all day long… shoot, Tony Shea could tell us he cares about customers. No one bought it until he told us… or someone else told the story about how they were going to a funeral, needed some shoes or something, and that… I don’t even remember the story, but I remember the message that came along with it. So when you ship the story out… when you tell a story, people remember the message behind it.
That’s why I’m asking about this Paychecks’ issue. You guys were using Paychecks, and what happened?
Josh: Yeah. I think what you’re asking is really what caused us to start Zen Payroll.
Andrew: Yeah.
Josh: And there were really two main catalysts.
Andrew: Okay.
Josh: One of the catalysts was, as founders, the three of us had all had prior businesses.
Andrew: Okay.
Josh: And I had had… my previous start-up, which we’ve discussed at length, my co-founder, Tumar (?) had a prior start-up, and so did my co- founder Eddie. And we had all basically been using other systems for payroll, because we had been running those companies for a few years.
Andrew: Mm-hmm.
Josh: And I sold my company, Eddie had sold his company. That’s much of what drew us to thinking long-term with Zen Payroll.
But that catalyst was we had been users. I think a lot of times when you’re starting out, you can try to kind of lock yourself in a room and brainstorm, and kind of get stuck in your own mind.
Andrew: Yeah.
Josh: In this case, we had many, many personal reference points on frustrations, and realizing that it could be better. And most of my friends are entrepreneurs, and I heard them complaining and talking about the frustrations they’d experienced. And so that’s why that was one of the core catalysts for us. There was a second catalyst, as well.
Andrew: Do you have an example of a challenge that you had using a competing service? What was one of the issues?
Josh: Yeah. I think… I mean, more broadly, I want to spot talk more about the customers we talk to. So we went and actually interviewed and spoke with hundreds and hundreds of small businesses. And we wanted to really see, did other folks feel the same frustration. And…
Andrew: I’m sorry. Let’s put a pin in that. And it’s okay if you’d rather not answer it. Believe me, I’m totally okay with you saying, “I can’t answer that.” But do you have one example… since… so here’s what I’ve got in my notes: “We used Paychecks in our previous business and found pain.” Do you have a specific example of a pain that you had there?
Josh: I’d rather not… to me, I think there’s different ways to build a… I’m not building a business based on focusing on incumbents, and trying to kill and destroy them. I respect everyone in the system. My focus is on serving our customer, and doing the best that we can to provide them the best possible product.
Andrew: Okay.
Josh: So I have nothing but respect for Paychecks. That’s just not…
Andrew: I shouldn’t have used the name. Maybe then we could…
Josh: That’s not the DNA of the company we’re building.
Andrew: Okay. All right. So you…
Josh: That’s not core to our value structure, I think.
Andrew: Okay. All right.
Josh: And how we think about it.
Andrew: So then you started to talk to potential customers. Do you have a specific example of a customer who you spoke with?
Josh: Yeah. I mean, even one good example is that second catalyst. Each of us have family that actually have been involved in running payroll for a long, long time.
Andrew: Okay.
Josh: So Eddie’s mother runs payroll for a small doctor’s office in LA. Tumar’s father is a small business owner, owns a clothing store, only a couple employees. And then my fiancee’s mother runs payroll for some technology companies.
So Eddie’s mother’s a good example. One thing we realized very quickly that was surprising to us was the number of people that currently do payroll on paper and spreadsheets. So Eddie’s mother literally meets every two weeks, every four weeks, with her accountant, with her bookkeeper, goes and writes checks by hand to each of her employees, goes to the government website, fills out various forms and filings, and is basically doing it the way she’s done it for 25 years.
Andrew: Wow. Okay.
Josh: And what we didn’t realize was almost half of the businesses in America are doing it that way. And that was what I mentioned earlier.
Andrew: Spreadsheets, by hand, walking things over. And when you saw that in Eddie’s mother, how do you do it? Do you just walk into her home or office and say, “Can we watch you so we get a better understanding of the problem and build a solution for you?”
Josh: Yeah. I think it’s really important, early on in the entrepreneurial journey, to not lock yourself in a room, and think that you can kind of come up with a five-year plan from scratch.
Andrew: Yeah.
Josh: There’s a whole world of hopefully folks out there that are feeling the pain and frustration of what you’re trying to build, to solve. And it’s great to talk to them.
So we did a whole variety of things, whether it was shadowing them for some period of time, doing a phone call, meeting them in person, having them come by where we were staying, getting introductions to other accountants, bookkeepers, small business owners.
We’re very focused on a mainstream user, so obviously we had a lot of reference points in the technology community. What we really wanted to see is, is this something that is frustrating for bakeries and flower shops and hotels and churches? Because we wanted to, again, solve the problem for that larger group, not just the people that we knew in our personal life.
Andrew: One of the challenges that I have when doing that is trying to figure out how many people do I need to talk to? How many people do I need to shadow? How did you know how many people were the right number?
Josh: I think it’s…I think more broadly, it’s actually a thought process on product development. When I worked as product manager, on my first job out of school, you know, companies always have a million things to do. I like to tell younger entrepreneurs, if you don’t have a million things to do, you might not be in a very interesting space.
So the assumption going in is you have a million things to do, and the key question is what do you spend your time on today? What do you spend your time on tomorrow? And a big part of that is what are the inputs? How do you learn from customers? From partners? From teammates? How do you understand what you should be spending your time on?
And so I don’t think there is a formula. I think you’re always going through this evolving mindset of listening, learning. Our entire team, engineering, business, marketing, spends time every month working in customer support, because I know, for Zen Payroll, it’s critical that every single part of the company really feels connected to the customer, and really feels connected to the problem we’re solving. Otherwise we’re not going to do as good a job as they would otherwise.
Andrew: I see. So there’s no hard and fast rule for the number of people. Do you have a sense of how many you talked to before you launched? It seems like it’s a healthy number.
Josh: Yeah. I mean, I would say an even launch, to kind of connect the dots, we started the company in November 2011. We went and talked to hundreds and hundreds of small businesses…
Andrew: Really?
Josh: …and accountants, and bookkeepers.
Andrew: Okay.
Josh: We were part of Y Combinator for three months, from January through March. We raised funding at the end of March, but then we actually didn’t launch until the end of 2012. So from ideation/inception to launching publicly was probably a good… it sounds like around 15 months.
And the reason behind that… again, it’s very unique to our business. Payroll is such a business-critical task. It’s something that always has to work right. There’s no beta or alpha or test period in payroll. We’re taking on full responsibility for all your taxes and compliance and filings.
So we had some early-on customers, obviously, that are folks we knew more closely. But it was very much an ongoing process until we got to the stage, in December of 2012, fully a year later, to be comfortable to say to the world, “Here is Zen Payroll. Here is our product. Come sign up. You are going to have a wonderful experience. And let us know if you have any feedback.”
Andrew: Before you officially launched that way, as I understand it, you launched privately, and did the books in person. I mean, or did the books manually for people, right? So it was a hand-operated business.
Josh: Yeah. I think that’s also a good insight, which is, again, the worst thing anyone can do is just kind of lock themselves in a room and… for those 15 months, we were working very hard, but we were spending a lot of time engaging with people, as well as building software.
And one of the first people we hired, actually, to go back to almost the second month of the company, was someone with 28 years of experience in payroll compliance, because that is something that we knew we had to have as a core skill set.
But when we started launching the product, the first phase, with a few customers that we knew very well personally, was really just meeting in person, without the back end. So we did all the tax filings and payment processing. But the interaction of deciding to run payroll was literally just calling us on the phone and saying, “Please run payroll.”
Andrew: I see.
Josh: And so we took a very staggered approach. Again, only with people we knew very closely. Before we got to a stage in December where we could say, “Now it’s an automated, fully-functional, comprehensive product that anyone can sign up for and use very, very quickly.”
Andrew: Yeah. I see the site. February, 2012, it was just a launch rock page with a request for an email address.
Josh: Yeah.
Andrew: And then skipping forward to September 2012, we’re looking at basically the same thing, but asking for a little more data, and now you’re not using launch rock to collect requests for signup.
While you were doing this by hand, what did you learn about the payroll system that you didn’t know before?
Josh: Well, I think for us, a big part of our ability to create a product… I mean, our name and body is our aspirations, and our tagline is “Delightful Modern Payroll” for a reason. It’s because we’re really approaching it in a new way.
Andrew: Mm-hmm.
Josh: And I think that’s, again, a broader shift. Companies like Square and Nest are great examples of that.
So in our situation, we never built payroll systems, but we had a lot of experience building software, and a lot of experience thinking about how to make really easy to use systems with really complex back ends. And so for us, like I said, that first hire, getting on board some folks who had 20, 25 years of experience in payroll compliance was critical.
But then from there, I would go back to one of our core insights early on. Remember I mentioned, half of the businesses in America do payroll today manually.
Andrew: Mm-hmm.
Josh: Payroll’s a set of rules. I mean, if you look at the compliance and filings, it’s black and white. And so we had this belief, which very quickly became validated, which is this should all be done in software. I mean, sending this payment to this agency over and over and over again? Software is much better than people at following rules. And our goal is to take all of that compliance headache and put in software, and then really make the product more focused on people.
I mean one of our core goals is if today compensation has becomes this very impersonal transactional event, how do we make it back to what it used to be: this very, very close connection between employer and employee. And that came through in a lot conversations we were having.
I mean we were, sure, building a more modern, faster, affordable product but that’s not our long term, you know, I would say foundation. It’s an incredibly important ingredient to why people like ZenPayroll today. But the people . . . The reason why people love ZenPayroll today is because it’s actually almost not like what payroll has been in the past. It’s more focused on the human connection, and that came through those conversations.
Andrew: Okay. For example, when you’re talking to people and having a human connection, do you have an example of something that you learn that before you got into this business you didn’t know as you were doing this all by hand?
Josh: Yeah, definitely. So you know, I think we’d all been paid as employees and we’d all run our previous businesses as employers. So we’d actually already experienced both ends of the spectrum from a usability standpoint. So I think one of the core lessons for us was this idea that, again, payroll should really be delightful because it has two of these building blocks. People are getting paid.
You know, we had this thesis: people like getting paid. I mean, it sounds like common sense. People love getting paid. I mean, we send an e-mail every two weeks that says, “You got paid today.” And it gives you this long breakdown on where it came from and what the makeup is. And you can probably guess what the open rate is on that e-mail. It’s a really critical moment in people’s . . .
Andrew: I can imagine. And so didn’t realize that people . . . I’m sorry, I feel like I’m not getting it. Are you saying that until you did it by hand, you didn’t understand that people liked getting paid? See, usually when people do things . . . I’ll give you an example. I remember when I was talking to Eric Ries, I said, “Why did you have to talk to customers one at a time? What did you learn?” He goes, “Oh, so much. I brought one in and I said, “Here, this our new IM program. Can you install it?”
And they said, “Install it?” “Oh, sorry, this is our IM plug-in.” And they said, “What’s an IM plug-in?” And he goes, “Here, let me install it for you.” And they he installed it and he said, “Okay, now talk to a stranger.” And they said, “Wait, talk to who now?'” And by talking to people and watching them in person, he learned so much. Like, no more plug-in he had to go into, creating a separate stand-alone product.
No more of this trying to connect people with, I think it was connect people with strangers. He understood that it’s okay for them to talk to each other. Did you have any kind of insight like that by interacting with customers directly or for you was it just a validation of you knew because you knew so much before?
Josh: I mean would say that our ability to build great products every day depends on that. So I don’t think it’s any moment in time. There’s no window, there’s no checkbox.
Andrew: I see.
Josh: Every single day we talk to customers because that’s the only way to build a great product.
Andrew: Okay.
Josh: So, you know, I don’t think of that as something that was only important back then. I would say that’s important every single moment of every single day.
Andrew: Okay. All right. Well, let me finish the interview here by something that you guys launched you blog with, which is a list of the company values. And it was: ownership mentality, don’t optimize for the short term, we are all builders, go the extra mile, do what’s right, be transparent. This is a tremendous company that you’ve built. You’ve united incredible investors behind it.
I think I pushed so much for specifics and stories that I want to make sure we don’t overlook the amazing growth you guys have had and the amazing experience you guys have had. I want to thank you for being here and for sharing it with us. Let me ask you this: did it feel like I was pushing too much for specific stories before we end up, and for specific examples? Or do you feel like . . . How did it feel? I feel like I keep pulling for specific examples and it’s not your style. I want to make sure that . . . Actually, let me ask and let met check in with you.
Josh: No. I actually love, I mean, still on the record or is it?
Andrew: Oh yes, still recording. I’m recording and I just want to try and get a sense of, do I push to much more specifics? Do I push to much for specific examples? Or, what do you feel?
Josh: Well I think . . . Well frankly, I think that our whole day and our purpose as a business is based on the examples. So pretty all I love to talk about is the examples. I think it requires some broader background first to know what they mean before we can dive into a lot of the specifics.
So I mean I’m full of lots of stories on the early days of the company, the types of customers we’re serving. You know I go to bed every night looking at the list of business that have signed up and it’s this crazy cross- section of, you know, two equestrian training centers last week and sensory deprivation company in Seattle and a bike-maker in New York and a bakery chain down in L.A.
Those are the businesses that make me proud in terms of what we’re building and I think our long-term mindset is driven by, you know, wanting to serve those types of customers. But early on, we were three guys in a house. We had our co-founder Eddy [SP] literally live in our closet for three months because he wanted to not commute down from San Francisco.
Andrew: Wow.
Josh: We spent a lot of time on this. But I think, if anything, I would have one takeaway be that we’re taking a very deliberate approach. This is something we hope to spend many man decades working on because it matters to us and we feel fortunate to be in this position.
Andrew: Yeah, this is . . . It’s an important product and an important issue that you’re tackling here. And it’s exciting to see that you’re not just looking to get into it to get high valuation and then sell the business overnight. I know that the customers that are signing up, the companies that you’ve talked about, are all proud to be working with you and know that they’re handing their employees’ information to a company that really wants to be in the business, that really wants to keep taking care of their employees down the road.
It’s been an honor to have you on here. I hope to keep watching ZenPayroll grow and grow and grow, and I hope that we’ll get to have you on at some point in the future too.
Josh: It was a pleasure. Thank you so much, Andrew.
Andrew: You bet. Thank you.
