Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy where I do interviews with proven entrepreneurs for an audience of real entrepreneurs who are listening as they’re building their companies. And a thing that many entrepreneurs are embarrassed by is that their bookkeeping sucks, and that they blame themselves for it because you as a founder need to know it and the truth is, yeah, really, you as the founder you need to know your numbers. And if things are screwed with the numbers or if you don’t have them right, it’s your fault. I mean, I’m not going to soft-pedal this thing. It’s actually your fault. But if you’re not organized, you’re not the only one.
Just a little while ago I was talking to A.C. the founder of drips.com about how he ran into tax issues, real, legitimate big issues because he didn’t have his numbers under control. And now on a weekly basis, he goes over his finances. So this is an issue that I’ve talked about for years and I’ve been so proud that I gotten entrepreneurs on Mixergy to talk about how they screwed up their numbers, how it was so challenging.
Today’s guest also saw that pain point. But instead of saying I’m so proud that, “I’m revealing it to the world,” he said, “Huh. That’s interesting.” And then he did nothing about it. He didn’t do a single thing until a few years later when he was looking for a new idea, when he said, “What’s my next big business?” And this is a guy who started a couple companies. When he said, “Haha. This issue that’s been plaguing entrepreneurs, it’s been plaguing startups. It doesn’t have to be an issue. I think I could solve it.” And he did.
He’s got a company that’s not that old, but it’s doing really well already. His name is Waseem Daher. He is the founder of Pilot. Pilot is a bookkeeping service for startups. Their aim is to solve the problem that people like A.C. and frankly other entrepreneurs, I don’t want to pick on A.C., a lot of entrepreneurs have by giving them organized clear books to us so that they see how well their business is doing and where their challenge is.
All right. This interview we find out how he did so well so fast and why he is not just into software but services, actually, hiring people and managing them. It’s sponsored by two phenomenal company. The first is hosting me in this office space. I’ve been using Regus for about a decade now and I finally am getting paid to talk about it probably temporary. I can’t imagine they’re going to want to deal with me for much longer. But Regus I’ll tell you about them later. And the second is a sponsor that Waseem knows. It’s called HostGator for hosting websites. I’ll tell you about them later. Waseem, it’s good to have you on here.
Waseem: Thanks for having me on this show.
Andrew: Hey, revenue-wise. What are you guys up to?
Waseem: So we don’t go into specifics, but it’s definitely in the millions.
Andrew: In the millions? Oh, wow. So that’s even more than I’ve had. So we’re talking about millions of dollars a year in revenue people paying you to do their books.
Andrew: Over three?
Andrew: Over 3 million?
Waseem: We don’t go into the details, sorry.
Andrew: But the company started 2017 just last year, right?
Waseem: Yeah, January 2017.
Andrew: And how . . . It’s not that you have your own software that you’re using to keep my books. You’re just using QuickBooks, right?
Waseem: Yeah. It’s really interesting because from our customers’ perspectives, what we’re doing is, look, we’re a bookkeeper. You’re paired with a person who sits here in our San Francisco office, they are your dedicated account manager. They do your books every single month in QuickBooks. From your perspective, it’s like, “Awesome. I have a talented, smart, very detail-oriented, very meticulous person working on the books.” And that . . .
Andrew: Oh, did we just lose him? Oh, there we go. We lost you for a second but you’re back. Uh-huh? So, from my perspective it’s just a bookkeeper, a human being in the San Francisco office who’s my connection. I keep saying mine. I’m not a customer of yours, though, I’ve just recently discovered you guys and I’m fascinated by it. I’m drawn to what you’re doing. Okay. So what goes on behind the scenes, though?
Waseem: So, under the hood, it’s a combination of the smart, talented person and then we also have a team of software engineers. And the mandate for the engineering team is to build tools that the bookkeeping team uses to do the books more accurately, more consistently, more correctly. Under the theory that, look, if you look at bookkeeping, and it’s a very exciting topic, I assure you, like, 90% of the work is honestly taking data from our particular electronic system whether it’s the bank feed, the payroll processor, the credit card, the expense reporting tool, and then effectively transforming it according to a series of well-defined rules, the rules of bookkeeping, and then putting it in another electronic system, namely QuickBooks. And so it’s not hard to believe that the best way to take data from system one, transform it to certain set of rules and put it in system two that like that’s actually not clicking around in QuickBooks, so that may not be the best way to do that.
So what we said is, “Look, let’s build some software tools and let’s give them to our bookkeeping team to do the work more accurately and more efficiently.” And the reason we structured it this way is because when we were thinking about our customers, I guarantee no one in the history of companies ever has been like, “You know what I really need? More accounting software that I can learn to use.” No. What people said is, “Look, I want this problem solved and I want this problem solved by a team that I trust is doing a good job.”
Andrew: But you know what? The thing that fascinated me about you, and you’ve got competitors, I invested in one of your competitors, is . . . What was that smile about? You know that. The thing that fascinates me about you is unlike others in Silicon Valley, you said, “We are not going to create software to compete with QuickBooks. We are going to actually use QuickBooks. Our software will just replace the hands that would have copied and pasted from other data sources.” Why didn’t you say, “I’m going to take on QuickBooks. There’s more money in software,” isn’t there? “than in backend services.”
Waseem: Well, so, I think there are kind of a couple ways to look at this. One is, if you look at QuickBooks for better or for worse, it’s the industry-leading product out there. And what that means is that Intuit has invested probably thousands of personal . . .
Andrew: Well, hang on. For better or for worse, if it’s the leading and the software is for worse, the whole thing about Silicon Valley is we’re here to replace the worst entrenched technology with something good. If it is actually good software, then maybe it changes things, but it seems to me like you’re saying, “It’s actually good. They spend a lot of money and they do have good user experience.”
Waseem: They do, but also really importantly, the ecosystem is there too, which is, I think, like, these tools don’t exist in a vacuum. It’s like you’re using QuickBooks but you also have a tax preparer and you have a payroll system and you like . . . There are all sorts of other components in the ecosystem that interface with this stuff.
Andrew: Did you just snap your fingers because the lights went off in your office?
Waseem: I tried to. The motion detector that didn’t . . .
Andrew: So you’re that cheap guy who has the motion detector in your office?
Waseem: We got to save power here. It’s very important to be ecofriendly.
Andrew: Okay. All right. Okay. So you’re saying you’re right, right. We might create better software, but then we have to get not just the software startups in Silicon Valley to use it for themselves but for the bookkeeping comp . . . not the booking, the accountants and all these other services. But couldn’t you create a tool that would just kind of be the intermediary for them to . . . You were almost like sneering at that idea, like that’s not good. Why?
Waseem: No, no. You definitely could. Here, I think, is the challenge, which is that in general, people don’t like to change their ways. And so the onus is on you, the person making a thing, to make it very, very clear to them that your thing is 10X better than what exists and it needs to be an immediate payoff or they just will not do it. And so if you think about, like, the pieces involved here, it’s like, okay, you need to get the startups to adopt it, and then if you’re building your own thing, I guess you need the other partners to integrate with it, like the other players in the ecosystems, and then you need to tax preparers to also like be willing to use it. And in general, the industry of like bookkeeping and accounting, they’re not known for being like creative. Like, creative is a bad word if you’re thinking about . . . You want to be conservative on . . .
Andrew: Right. Creative bookkeeping will maybe land you in jail.
Waseem: Right, yes.
Andrew: All right. I see. You know what? I’m fascinated by this approach because in San Francisco, in Silicon Valley, in the tech world, startup world as we know it, people want to create software and if you don’t create software, you’re almost an inferior human being. Now, there’s a new group of people. I feel like Brian Castle has been championing this who say, “Let’s create productize services.” Nothing but a bunch of people who do the work that is the product that we’re selling. You’re doing a mix of both and I’m fascinated by that. I don’t know a lot of companies that do it your way. And I feel like even you came from the world of software is the ideal. Eighth grade, you wrote a paper. I don’t know if you remember what I’m talking about. Who was the paper about? Do you remember?
Waseem: I think it was like fan mail to Bill Gates. It was like literally a fan letter.
Andrew: Which, by the way, way to go, you. I feel like too many eighth graders and kids in school are idolizing whatever music celebrity or Fortnite players out there. You’re a guy who said, “I’m kind of into this guy, Bill Gates.” What was it about Bill Gates that drew you? What did you want to be based on that?
Waseem: Well, I think I was always just like a big computer nerd and this idea of like, wow, here’s this person who made this whole ecosystem and like everyone used his stuff. Like, that felt, I don’t know, it felt very transformative. I think also like, look, you’re in eighth grade, you’re like, “Hey, this is kind of cool.” Like . . .
Andrew: Yeah. Meanwhile, you’re a guy who also comes from Lebanese background. You got to tell people . . . Your family all ended up in what city?
Waseem: Akron, Ohio.
Andrew: Why so random, by the way?
Waseem: You know, I don’t really know because while Akron is a great city, it’s probably not like my number one . . . If I were coming to the U.S. for the first time it’s not maybe the first place I would go. I think what happens with these things and I think this is very common for immigrants generally is like the first person comes to the country, and I assume that this person came, I don’t know, like the 1900s or something and was looking for jobs. And where do you get jobs as a recent immigrant in the United States at the turn of the century? In a factory. Where were factories? It looks like Ohio, Pennsylvania . . .
Andrew: Got it. And then the next family member, the next family all ends up over there.
Waseem: Right. Who do I know in America? Oh, that one guy in Akron, Ohio. I guess that’s where I’m going to go.
Andrew: Including your dad who came in with how much money?
Waseem: It was my uncle . . .
Andrew: Your uncle, excuse me.
Waseem: Yeah. He came in with literally $4. So he’s like . . .
Andrew: Four dollars.
Waseem: I imagine that he got on a boat, it was probably a plane, but in this version it’s going to be a boat with literally like $4 in his pocket, like, to come to America like make a living for himself.
Andrew: And the reason you know it’s $4 because he still had it.
Waseem: Right. He still has the $4 and he gave one to each of his kids when they got married. It’s like this guy was like really an American Dream story, a real rags to riches [inaudible 00:10:18].
Andrew: And you admired him. Fair to say you idolized him?
Waseem: I mean, look, it’s just such a satisfying story of hard work. I mean . . .
Andrew: What did he do? What did he owned that you looked up to?
Waseem: So he owned a bar and I thought this was the coolest thing because he had a pinball machine, and it’s like you’re a kid and you’re like, “Oh my God. This guy owns a pinball machine?” Like, he must really be doing well.
Andrew: You know what? I really used to dream of that too. The ability to just play pinball because you can’t get pinball at home on your Xbox or whatever it is, right? So, he had that. He also owned a coffee shop. Apparently, your family was really into coffee shops and he wanted to hire you and your dad said [inaudible 10:55] . . .
Waseem: My dad [inaudible 00:10:56] So this guy, my uncle, is a very, very savvy businessman. He’s just like a very sharp guy. He’s very good at getting like, good rates on everything. So he comes to me, he’s like, “Hey, Waseem, I hear you want to work in this coffee shop. Here’s the deal I’m going to propose to you. You can have, like, as much coffee and as many snacks as you want. That’s what I’ll pay you with.” And I was like a kid at the time. That sounds amazing, like, unlimited muffins, like, I am in. My dad was like, “That’s a terrible deal.” Like, “No, you are not doing that.”
Andrew: You know what? I looked at where you were doing. You ended up with a bunch of internship at Davis [SP]. I don’t know what that is. Intern at AOL. I definitely know what that is. Intern at Amazon. Intern at Google. Intern at OK Cupid. You did like the round of internship. Did those people pay you in more than just coffee?
Waseem: They did. I mean, I think they probably also had free coffee, but they also did pay me money and it was nice.
Andrew: Okay. And then you were out there with a few of your friends from MIT, you create something called Ksplice, which, get this, I know Apple recently released a new version of Mac OS. I’m eager for it to be on both of my computers over here. I still haven’t done it because of this simple reason. I don’t want to restart my system. I don’t want my system to be down. And that is the issue that companies have and you created software that said, “Look, you can upgrade, not every upgrade, but the ones that we can, without any outage.” Right?
Waseem: Exactly, right.
Andrew: And that was the software. You sold it . . . Who were your customers, I mean?
Waseem: So many of our customers, in general, we did this for Linux. The customers were Linux system administrators. And actually, this is a nice segue when we get to it. Many of our initial customers were in the web hosting industry because you sort of have this challenge where you’re running this web hosting operation, your customers are paying you to keep their sites up, but you’re also pretty vulnerable, like, you have all these sites on the internet, you’re exposed to attacks. You want to keep these updates installed because they fixed security issues. So it’s kind of you’re sort of in the sweet spot of you want the updates but you don’t want the downtime, and that’s exactly what we were giving you.
Andrew: Were you considered one of the co-founders of the company?
Andrew: I got to tell you, when I looked you up, I don’t see you as one of the co-founders in the stories. Even Wikipedia which your aunt or an uncle could edit is not acknowledging you as one of the co-founders of the company.
Waseem: We’ll fix it after this podcast.
Andrew: Somebody please go in there and fix it for Waseem. Apparently, you’re not allowed to do it yourself. But you co-founded it. Who’s the person who started selling it to clients? I don’t want to spend too much time on that. I want to go into how you got into bookkeeping and how did you get to millions of dollars in like a year and a half.
Waseem: In this company or in Ksplice?
Andrew: Well, I’m going to get into how with this company with Pilot how you got to that. But just when you go back to Ksplice, how did you end up with clients? How did you sell it?
Waseem: So I did most of the sales and we had a small sales team kind of once we figured out the process. The initial process, though, like, of getting the first couple of customers literally we just emailed like all my friends. I was like, “Hey, we have this thing. This is where we think it’s useful.”
Andrew: Sorry. Ksplice, you did this? Really, you had friends who were running Linux?
Waseem: We just cast a very wide net. We were just like, “Hey, look, we have this thing, it can update Linux systems without rebooting. Can you think of anyone that this might be relevant to?”
Andrew: So, if you and I were friends at the time, you might have emailed me and said, “Hey, do you know someone?” I go, “All right. I know some . . . ”
Waseem: I would have definitely emailed you.
Andrew: You what?
Waseem: And the framing of it would have been not like, “Do you want to buy my thing?” It really would have been like, “Look, we’re trying to understand who the right clients for this thing are. Tell me about what your pain is about this stuff. I want to see if it’s bad.”
Andrew: Okay. I’m going to invite you back to talk about that. If you ever want to come up, I’m going to give you an open invitation, just say, “Andrew, Ksplice.” We’re going to set up an interview about that. But what I want to jump over to is while you were selling to Oracle, they kept asking you for data and what did you do that shocked them?
Waseem: Sure. So, as part of the Oracle acquisition process, this first company, Ksplice was acquired by Oracle, you meet with the heads of the various functions at Oracle that are trying to integrate your company to their company. And it’s the same process I assume for like giant multi-billion dollar companies as it was for our little 12-person company. We met with like the legal team and the product team, and eventually, we meet with the finance team. And the finance team is like, “Tell us about the state of the company. Tell us about your financial systems.”
And the sidebar on this is that, look, we totally bootstrapped this company. This was like right out of school. We really knew nothing about how to run a business. And so the thought we had was like, “Oh, I guess we need bookkeeping. I guess we need to do it ourselves.” And so I like I bought a copy of “Bookkeeping for Dummies” and a copy like “QuickBooks Desktop 2008” or whatever it was, and we just, like kept our own books up to date. And in doing that . . .
Andrew: By the way, “QuickBooks Desktop 2008.”
Waseem: It might have been 2009.
Andrew: Whatever the number was. It’s the reason why I decided to invest in . . . What’s it called? In competitor to them because I thought, “This is awful. It’s a desktop piece of software.” I was thinking about how to hack in like Dropbox to keep my stuff so that when I’m at my office I could see it, but also when I’m at home, I could go through it. It was just like a painful, painful experience. They were just wading into online bookkeeping. And this is the world that you were getting into and saying, “It’s frustrating but I’m the guy internally who’s like the sales business guy. I’m going to do it.” You were keeping the books in there. How did you do it different from me? I basically did it but I hated it. What did you do differently?
Waseem: So we did it by hand at first, and then it was like quite tedious to do. And I think the thing we said is, “Look, we all know how to program. I’m doing the same thing over and over and over again. I feel like software should be able to help out here.”
Andrew: What’s the same thing that you were doing over and over again?
Waseem: Just like categorizing transactions, like, putting them in the right place, like, marking bills as paid, like, really just the work of tracking kind of how money comes into and leaves the company.
Andrew: Right. That’s where Xero . . . I remember interviewing the founder of Zero. He was really big on starting to create rules and competing with QuickBooks, but at the time his website was very similar to like the 1990 stuff, everything was little too small, but it just goes to show he was online bookkeeping in a world where people had to buy desktop software and so he was doing well, and still is doing well, really, with Xero. And so you are getting into it thinking, “I can automate that.” Automating it, though, would mean automating through macros. What was going on the desktop?
Waseem: So even QuickBooks desktop had an API and it was like quite painful API, but it existed. And so we worked on some code that basically would talk to QuickBooks and make the changes needed to have the books up to date. And so eventually, we automate kind of more and more and more of this because we just don’t want to spend time on it. And we get . . .
Andrew: I’m sorry. There are very few people in this world who love and geek out on bookkeeping. I’m one of those people because I know if I could see my point in business, if I could see my points in anything, I get caught up in it. The only reason that I’m biking in the backyard at my house, I don’t have time to go cycle outside, is because I’m using an app that will keep track of how long I’m riding and I keep wanting to beat my numbers, right? Same thing. If I get bookkeeping with right numbers, I geek out on that. So, you were actually categorizing using their software, but what about pulling data in from your bank account? I know they used to do exports and all that. You would write macros, I’m imagining, to get that, or did you tie into them?
Waseem: So QuickBooks had some stuff where it would download the bank feed automatically, and then we would go and like, if we saw customer payment, it would go in and basically, like, match it up so that basically everything was done correctly.
Waseem: And the cool thing about through where we got this, and this was really a system we built just for our own internal use was that we had it be the case that every single day we could kind of run the scripts and the books would be up to date. So we’re there in that Oracle meeting and the Oracle people are like, “Okay. Can you show me your most recent balance sheet and profit and loss statement?” And we’re like, “Sure,” doo, doo, doo. Like, “Here is today’s balance sheet and P&L.” And they were blown away. They’re like . . . First of all, they’re like, “That’s not possible. Like, you must be mistaken. This is surely like last month and maybe you like projected it forward.” And we’re like, “No, no. This is like today’s numbers.”
And they were like, “That’s crazy. We are Oracle, the most sophisticated financial technology company in the world. We don’t have anything like this.” And then they asked . . . Then they said a thing that was a little offensive at the time, but probably right. They were like, “Why were you even working on your other product? Like, this should be the thing you work on? This should have been your product. This is amazing.” And we laughed and we’re like, “Okay, fine. Whatever. Who is the next [inaudible 00:19:24]
Andrew: It’s one of those goofy, like, dad jokes that people make, but I actually was thinking the opposite. Why are you bothering with this? So let your data be a week out of date, do it by hand, hire somebody else? Why are you spending time coding that instead of coding the software that’s the main part of your business?
Waseem: Well, honestly, I think there was a mistake which is, in general, when folks asked me about this now it’s like, “Look, you as the founder or the operator of a company, whether it’s a one-person shop or many hundred-person operation, there’s stuff you can uniquely do that like a super high leverage for you to be working on in general that’s like product, sales stuff, like, stuff where you the founder have outsized advantage.
And then there’s stuff where you don’t where you’re going to do it just as well as someone else will or actually probably you’ll do it worse than someone else will, and in that case I think those are great tasks to bring in a provider to do and that’s what we should have done, to be honest with you, on the bookkeeping but we didn’t because, like, we were young and poor and didn’t really know any better.
Andrew: Okay. Was it also that you just love coding that you just saw a challenge and you couldn’t help yourself?
Waseem: I think that was definitely part of it too which is there is like a satisfaction of all the pieces falling into place. Like, when the books are done correctly, it’s like all the numbers balancing, like, ooh, yeah, it’s working. The system is working.
Andrew: By the way, if somebody goes in and signs up for Pilot right now, I love your domain, pilot.com, I should have talked about that, will you give them up-to-date bookkeeping on a daily basis so they go in every day and their numbers are going to be accurate?
Waseem: Today what we’ll do is basically what our traditional bookkeeper would do, which is we update the books every single month. But the interesting thing about the approach which is like, again, it’s a bookkeeper, but there’s kind of software under the hood, is as we build the machine, if you like, more and more and more like we should be able to get to a world where we can provide new stuff in a more real time way.
Andrew: Yeah, I would love it at least once a week. But you’re saying, “So wait, if it’s automated, why can’t you do it daily and just, like, re-categorize some of the things that you’re not familiar with?”
Waseem: Yeah. I think the kind of motivation on this or the idea here is, again, to be sort of as consistent with kind of the practice of a traditional bookkeeper kind of in view one. It’s like, how do we make it feel like any other bookkeepers where transition isn’t too disruptive one?
Andrew: But can’t you do that? So you’re saying you intentionally don’t run the scripts, don’t run your software except for once a month?
Waseem: We basically do only run it once a month.
Andrew: You do?
Waseem: I mean, I think there are some things where we should run it more often truthfully and there’s some things where, like, you want the month to end so you can compare against like the bank statement or the report from the credit card processor . . .
Andrew: I get that but if like Stripe is sending new payment, shouldn’t you just categorize it right away and say, “This is clearly this product with that.”? But you don’t do . . .
Waseem: I mean, we probably should to be honest with you. Today we don’t. But like, the cool thing about more of this stuff getting pushed into software is that, in principle, there is no reason we couldn’t run it nightly. Like, today, one of the things that’s nice is the fact that the human is in the loop and you want the human who knows your business to like, have an eye on the work. But yeah, that’s a fair point.
Andrew: Ksplice, how much did you sell for?
Waseem: So we didn’t disclose the numbers, but let’s say, like, for me, honestly, it went from like having $500 in my checking account to like having much, much more than that.
Andrew: Did you have over $1 million at the end of that?
Andrew: You did?
Andrew: Wow. So how did you . . .
Waseem: And it was like a life-changing experience for me personally. And the joke that I used to make is, like, we used to live by Whole Foods, and so we’d walk past and I’d point at it with my co-founder and be like, “Someday we’ll shop there.” And like, yes, then we started shopping there.
Andrew: Makes sense. Is that the biggest thing that you got to enjoy from the sale?
Waseem: Yeah, that was probably my big splurge. It’s not like we went and bought a fancy car or anything. Like, we have generally like pretty simple tastes.
Andrew: All right. Let me talk about my first sponsor then get in and continue the story with . . . We’re kind of going to skip around a little bit to get to what happened with Pilot. I’m curious about how you got so many, customers. My first sponsor is a company called HostGator. I always check with my guests before the interview starts whether they’re happy for me to talk about them or do I need to replace them. You said, “I actually even know HostGator.” How do you know HostGator?
Waseem: So the CTO in HostGator, this guy David Collins, a great guy, was a customer of ours at Ksplice. As I mentioned, one of the industries we sold into a fair bit was web hosting and they were one of our larger customers.
Andrew: And what do you think of him? What do you think of them now that you know the developers there, the tech guys there?
Waseem: He, in particular, was all . . . It was clear that he was just like a Linux nerd and I say that in the most like complimentary way. That’s what you want in the people running your web hosting. Like, he just cared about doing it right and he was clearly like a technologist. So, for me, I was like, “All right. Yeah.”
Andrew: Well, guys, if you’re looking to host a website, I urge you to check out not just HostGator but hostgator.com/mixergy. They’re going to do two things. Number one, they’re going to give you what they are telling me and as far as I can tell is true, the lowest price on the internet, but I say as far as I could tell because I know that these guys love to test their pricing. But really, you’re going to get over 60% off their already low prices. That’s number one.
Number two, you’re going to get tagged as a Mixergy listener which I know because of my big freaking mouth, my sponsors and everyone else takes super good care of my listeners. And what you’ll get is a company that really has mastered hosting. HostGator was founded back in 2002 by Brent Oxley. If you do a search on my site for Brent Oxley, you’re going to see all these different entrepreneurs who I’ve interviewed who created hosting companies who’s butt Brent Oxley kicked because the guy, he must have been an obsessive. I’ve tried to get Brent on here to do an interview. I don’t know why we haven’t been able to do it. But he built it then. It’s still around today because it’s fantastic.
When you’re ready to scale up, like, I signed up for HostGator with one of their cheaper plans. When you’re ready to scale up, understand they have all the other packages that their competitors have which is dedicated server, excuse me. They have managed WordPress hosting. Whatever it is that you need, they got it all. But what they try to lead with is, look, here’s the lowest price. We understand that for many people that’s important. Once you’re ready to grow, we will scale with you.
So go to hostgator.com/mixergy and I’ll tell you this, they’re going to have a bunch of different features there, unlimited this, unmetered that. Here’s the one thing that you probably going to want to care about, 45-day money back guarantee. If I’m full of crap, they will give you your money back, but what I found is, and you know me, I asked you to give me your feedback all the time, firstname.lastname@example.org or just come to my office, 201 Mission Street in the heart of San Francisco and let me know if anyone of my sponsors is not taking good care of you. I know because I’ve been looking at the feedback. People are enjoying working with HostGator. It should be one of those things that just solved for you so you can focus on your business. HostGator.com/mixergy.
Waseem, you sold the business, you then went on to start another company that was kind of a chat app for businesses. You sold it to Dropbox. You worked at Dropbox as what was it? Product Manager, I think it was, right?
Andrew: You spent a couple of years with Dropbox and then it was time for you to start another company. Were you sitting around saying, “What’s our next business idea?”
Waseem: Actually, kind of yes, which is the . . . So I took a little time off between Dropbox and starting the new company. And one of the things I spent a lot of time thinking about was, “Okay. What are the attributes that are important to us and the next thing?” And for me, actually, above anything else was the team. It’s like, I want to work with a set of smart, talented people that I like and respect. Like that, for me, was above all. So, then I was like, “Fine, let’s get the band back together.” It was kind of the same founding team actually across Ksplice, that second company Zulip, and this company Pilot. We got in a room together and we were like, “Okay. What’s the next thing we want to do?” And it was very much team before like idea . . .
Andrew: I’m curious about what criteria you had for it, but first, let’s talk about the team. It’s the three of you?
Andrew: What’s the responsibility breakdowns? How does it . . . What is it that makes you guys so special?
Waseem: Sure. Well, I think part of it is that we’ve just known each other for a long time and we have very compatible working styles. The founders are me, Jeff Arnold who’s our Chief Operating Officer, and then Jessica McKellar who’s our CTO. It’s actually funny, we were all at MIT together, we like, took classes together. We were in basically, like, the Computer Club together which the Computer Club at MIT is . . .
Andrew: There was really a Computer Club and you were really in it?
Waseem: That’s really like as extreme.
Andrew: That’s like nerd on top of nerd.
Waseem: Yes. It’s like . . . Yes. So we were all in this together, so like we were classmates originally and then we all worked together on that first startup. And I think the thing that is important in any kind of founding dynamic or founder relationship is like compatible working styles, figuring out, “Fine. What are each of our areas of ownership? What are the things we’re going to focus on? What is going to be my domain versus what is going to be in your domain or . . . ”
Andrew: And yours is sales?
Waseem: Yeah. My main focus areas in general, like, historically had been like sales and product. And then this company, I’m actually exclusively kind of focused on the sales side. But yeah, exactly.
Andrew: All right. And so the breakdown is sales. Who’s in charge . . .
Waseem: So today . . .
Andrew: I’m sorry. Technology.
Waseem: Sales is me. Jessica runs the engineering team. And actually this company Jessica also manages the product specialist team which is what we call the bookkeeping team. And then Jeff is really kind of big into two areas. One is a lot of like, strategy around kind of like pricing and go to market and partnerships are kind of how we think about that stuff. And a lot of what Jeff does is also like finance, legal, like, HR, figuring out like what we’re going to do for office space. It’s actually like he’s a really like, there’s a very wide gamut of stuff that he does and he just crushed it.
And the thing that’s nice I think about our having worked together for so long is like we just know each other very well and I can tell you at any given time, like, what Jeff will think about something or what Jessica will think about something because we’ve spent so much time together.
Andrew: Have you ever been down, depressed, like, unsure of your success or something? It feels like things have, like, fall into place really fast. Have you been?
Waseem: Definitely. I mean, we . . .
Andrew: You were?
Waseem: Things have gone very well, but I think it was not at all clear, like, that they would. I mean, the first company . . .
Andrew: What was your personal lowest point before pilot.com?
Waseem: I think it would have had to be at the first company at Ksplice because the Ksplice it was all like untrodden territory for us, like, we were all new grads and it’s like we didn’t really know anything about starting companies. Like, my default assumption was like, I don’t know. I was going to go work at Google or something like that. But we’re like, “Let’s do this company,” but we knew nothing about anything. It’s like, first of all, we weren’t even sure it was possible to build the thing. Like, we have this idea, “Hey, can we apply these updates without rebooting? Well, maybe.” It was the . . .
Andrew: What was the time when you are so down that you needed to go to one or two co-founders and say, “Listen, I think this is not going to work out,” and need them to pull you back up? Did you have that?
Waseem: Yeah. That definitely happen. I mean, I think that’s one of the nice things about having co-founders is it like sort of moderates, like, you feel good and they feel bad and you can pull them off or you feel bad and they feel good. For me, I think the things that always like would bring me down or like when we would lose the sale or if a customer stopped being a customer or if, like, I don’t know, someone was mean . . .
Andrew: And so what did they say to you when you were that way when you’re feeling like this is all hopeless or I’m down about this? You can kind of imagine what they would say. What would they say to you?
Waseem: I think for us, it’s about like, fine, well, what are the things they’re actually working? Like, look, we’ve assembled an amazing team here, revenue is growing, the technology is working, like . . .
Andrew: So it’s just, let’s just look on the positive.
Waseem: But at the same time, I think, like, we are super pragmatic about it. Like, if it’s actually not going well, we’re not going to sugarcoat it. We’re going to be like, “Yes, this is bad and we need to fix it.” And so I think just like being very sober and honest about like, “Well, what is the true state of the company right now?”
Andrew: Okay. Let’s go back to the criteria. You knew who the team would be, three of you got together, you said . . . Actually, where would you sit and talk about this. Was it a bar? Was it a club?
Waseem: No. We’re not cool. I thought we covered that, the Computer Club. Initially, it was like each other’s apartments. And then for this company, actually, there was basically like a co-working space essentially that was run by an ex-Dropboxer that we were spending some time . . .
Andrew: So you just go hang out in there and you white-board it and say, “Here’s the criteria that I need.” Really?
Waseem: I mean, this was actually one of the, like, most frustrating times for me because it’s like you can’t just brainstorm for eight hours a day, or at least I can’t. And I found it like, quite emotionally unsatisfying to lack the structure. I want to know, okay, this is the thing we’re going to do and now let’s figure out how to do it. The lack of constraints actually, for me, was, like, pretty disheartening because it’s easy . . .
Andrew: That’s why I’m fascinated that you were very intentional about it more so than most of my guests. So what was it? Did you end up with a process? Did you say, “Look, I need some constraints here, the 10 things that are important to me. Here are the three things that are important to me.”? Did you have anything like that?
Waseem: Yes, and they’re all going to be a little vague, but like, let’s talk about that. I think, for me, one of the things that I really enjoyed in kind of all the companies that we’ve done are really just all the projects I worked on historically, is this idea that you go and you talk to someone and they tell you about some problem they have and you’re like, “Well, we’ve built a thing that does XYZ,” and they’re like, “Wow. Can it really do that? Like, that sounds awesome.” And again, that is true of almost anything, but this idea that you’re making a thing that people actually like and want to use. So, for me, that was big. It’s like you should want to use it. It was criteria number one.
Criteria number two is, look, if you look at the impact of things in the world, some of them I think are societally like harmful and some of them I think are societally beneficial and there’s a spectrum. I just want to be like neutral or better. We don’t need to be curing cancer. And I’m not going to tell you, like, “Oh, at Pilot, we’re curing cancer.” Like, “No, we’re doing bookkeeping.” But is bookkeeping useful and beneficial? Like, yeah, it lets business owners focus on the reason they started their companies in the first place.
Andrew: But you’re not going to create vape tools, for example. Vaping is not your . . .
Waseem: Yeah. I mean, I think there’s like . . . If you look at the public health effects of something like, yeah, smoking or [inaudible 00:33:34] . . .
Andrew: Okay. What else is there? I was thinking you would have something different. I think in my mind I thought you would say, “I know that small and medium sized businesses are the right target for me because I get them. I’m kind of in their world.” I thought you would say, “I like them because they have enough money to pay for software but they’re not so big that they’ll put me through this whole gauntlet to make sure that I’m the right . . . And then we have to have this long sales process.” I thought it would be stuff like that, but it wasn’t.
Waseem: Well, so the two things I gave you were kind of like reasons of the heart, which is like, is this going to feel good to me to work on these things? Then like if you want to be very rigorous or analytical about it, the questions I would have in general, like market size. Like, how big can this thing be if it’s successful? And the second is, like, yeah, who’s the buyer? What is their budget? Is their hair really on fire about it? And so like, when we started to, like, approach an idea, then it was like, fine, “How do we diligence this stuff? Let’s go and try to find three or four people that would be potential customers. Let’s ask them like, ‘Is this a problem you have? Where on your priorities is it? How much would you pay me if we could solve this for you?'”
Andrew: You want a hair on fire issue, something that’s so urgent that they say, “I got to have some solution. Save me from this.”
Waseem: Yes. Because here’s the problem actually, like, priority number 10 is actually a bad place to be because you’re never . . . Like, the customer is never going to get a priority number 10. If you’re not at the top three, it’s just hard to get the sale.
Andrew: Yeah, yeah. But if this is the most critical issue and somebody comes in and says, “I think I have a solution. It’s not perfect,” they’re going to jump in.
Waseem: Right, exactly.
Andrew: All right. That’s what you’re . . . What did you kick around and not pursue?
Waseem: We thought about, like, the thesis I think this time of this company it was something really boring, and in particular I just like the idea of “boring business” because what it means is that it’s underserved. And you had a guest on here recently actually who . . . the EasyShift guy who I think said something similar which is like, “Look, these are the places where these institutions aren’t very good because they seem ‘boring’ and so it just feels like the opportunity is [inaudible 00:35:44].”
Andrew: Right, right. Yeah. All right. I’m getting it you then said, “This could be our thing.” Did you start to code or start to go after clients first?
Waseem: So the cool thing about . . . I mean, definitely started to go after clients. But the cool thing about this business in particular for us was on day one we’re a bookkeeping company, and what does every other bookkeeping company have? They buy a copy of QuickBooks. So, I bought a copy of QuickBooks. And then I emailed like, again. I was aggressive. I emailed probably like 30 or 40 people literally on the day that we decided to do this and I was like, “Hey, who’s doing your bookkeeping? And what if we did your bookkeeping?”
Andrew: So you know what? I was thinking about this a lot. I’ve been wanting to ask you this question. The thing about bookkeeping is if I have somebody who I’m working with even if it’s a hair on fire it sucks, I can’t switch and try you out. Like I could, for example, there’s so many different apps now that will handle my email on top of Gmail. I’m a little reluctant to give some of them my data but I could switch back and forth so easily. With bookkeeping it’s really hard. You’ve got a team of people who are already messing with your books, you’ve got a system. You can’t as much as you’d like this guy Waseem you say, “I can’t.” Was that at all an issue?
Waseem: I mean, it is and it’s like doubly an issue which is to say that in like the very early days of the company, we’re like, “Hey, we’ll do a free trial for you for however long.” And the problem with that is like, unlike the software free trial, it right cost you basically nothing to do, the bookkeeping free trial is like actually fairly expensive. It’s like there’s a person here who does the bookkeeping. And so it’s kind of a related challenge which is just the cost of actually both on your side of switching and on our side of actually doing the demo. Like, you’re totally right. There is friction there.
Andrew: Yeah, you can charge someone nothing and still it’s going to cost the money to switch over. So then was that an issue at all when you were just reaching out to your friends saying, “I’m now in a bookkeeping company”?
Waseem: Weirdly, it was not particularly an issue and I think here’s why. First of all the people I was reaching out to, in general, they were other like early-stage startup founders. So, for them, like, for our initial customers, it’s not that we got them to switch from something else, it’s just that we got them to start with us. But one of . . . I’m trying to remember exactly kind of what the first person who was our client wrote back . . .
Andrew: Scale API I think was the first one.
Waseem: Yeah, exactly. They wrote to us and they said, like . . . I emailed and I was like, “Who’s doing your bookkeeping?” And they’re basically like, “Oh, yeah, we should probably do that.” I was like, “Great. Let me take care of it for you.” And it’s because we got them at the right time. The company had sort of just been formed, they just raised a little bit of money, so it was becoming top of mind for them.
Andrew: And it feels like that’s the best time to go after someone because, yeah, there are moments when businesses just want to switch, but those are rare and you can’t advertise and make somebody say, “I’m ready to switch.” And when they’re getting started, they don’t want to pay for it. They don’t have enough revenue. It’s that in-between spot where things are kicking off, they’re doing it themselves, they found a bad solution, and they’re looking for something serious. That’s your sweet spot.
Waseem: I think there are a couple of moments in the life cycle of a company. And this is true for any product you sell. It’s like, when are people ready to buy it? And so for us, it’s like, okay, you can get you when you just incorporated, or if you’re a startup or you’ve raised some money, like, maybe when you just raised that seed round and your investors are going to start to ask you for like your books, that’s the time you’re shopping. Or the third is like around tax season because your tax preparer, like you find your tax repair and you’re like, “Hey, can you do our taxes?” And they’re like, “Sure, send me your books.” And then you’re like, “Oh yes, we definitely have books that we’ll send you,” and then you’re like googling like a bookkeeper.
Andrew: Right. I imagine actually that at that point you guys have a lot of business from people who are trying to just get caught up.
Waseem: Yeah. It’s seasonal in a way that . . . I mean, it’s the reality of it. It’s not ideal obviously. You’d prefer it to be evenly spread over the course of the year, but the tax deadline is a good push.
Andrew: So, if somebody comes to you a month before the deadline, you can actually get their books in order?
Waseem: Generally, it depends on the exact timing to be honest with you, but generally, yes.
Andrew: Wow, that’s impressive, actually, because it is a lot of work to even understand what they’re using and . . . All right. Let me take a moment to talk about my second sponsor and then we’re going to come back in and talk about what happened, who did Scale API’s books, and then how did you go from there? My second sponsor is a company that I don’t believe they’re going to survive with me for a long time, but I freaking love them. It’s called Regus. So, guys, write it down. Ten years from now when you need an office space, two years now, whenever a friend of yours needs it, you should go Regus. Let me tell you why. Let me give you one clear example.
You guys might notice my mic is now a little bit different. I’m trying to make my audio sound better. I have an earpiece and I’m trying to listen to the sound of my voice. The thing is I could never get the mic to be in the right spot here because the freaking boom arm can’t hold up the mic. So, finally, I had a conversation with someone on our team and he said, “Why don’t you just get pliers and fix it?” And I go, “I don’t have pliers.” I say, “Wait. Of course, I should do pliers.” I go to the receptionist here at Regus, she goes, “Yeah, I got pliers. I got tools.” She pulls out her businessy like pliers set that I guess they got from Staples a long time ago. I use it, I fix this. It’s perfect.
I’ll give you another example why I love working from Regus. And for those of you who don’t know, Regus gives me off . . . They rent me office space, beautiful office right here, receptionist who help greet my guests and help me with stuff. I like this lounge where I can just go sit when I don’t want to sit at my desk for a little bit or when my guests just want some space to veg out. I have a kitchen where I can put my healthy food in there, coffee, endless supply, lots of space there.
But let me give you another thing that I love about Regus. I freaking love these guys. I had a mess in my drawers and it bothered me. I just couldn’t get things out of the drawers properly, and then I thought, “I don’t have to solve it myself. What if I just have somebody come help me?” I went to the receptionist, I said, “Would you please come and just go through my drawers with me?” And she said, “Yeah, of course.”
I thought what you would do is kind of watch me maybe help me make decisions. She was so on it. She just jumped right in there. She said, “Andrew, I don’t think you need this. We’re going to put this in a throwaway pile.” I said, “Ah ah ah.” She was, “Something on the way in a throwaway pile. If you have second thoughts, you can take it out, but let’s just see what’s going in there.” And she just started going through everything in my drawers with me and I felt so relieved at the end of it. Everything just that I didn’t need went in the garbage and now I have office space that feels comfortable.
This is what I love about Regus. Great office space, great services and when I’m ever somewhere else, anywhere in the world pretty much, they have a Regus office. Let me see, actually. You are from where in Lebanon. Let me see. “Lebanon Regus.” Let’s see if they have a Regus in Lebanon. I do this all the time because if I happen to be in Lebanon, yes they do. Lebanonregus.com. Right? A hundred and twenty countries have Regus in it. So, if I’m ever there, if I’m ever in Europe, if I’m ever somewhere, I swear, I’ve done this on vacation, I sometimes just need to go and work, I need clear office space. And don’t tell me the hotel internet. That sucks. It’s never fast enough. I just need an hour of work that gets stuff done, I go and I find a Regus, I work and then I come back.
If you need office space, guys, remember this name regus.com/mixergy, regus.com/mixergy or anytime contact me and I’ll introduce you to my person. I only was introduced to them because this guy, Maneesh Sethi heard that I was looking for office space and he introduced me to Regus. I’ve been grateful and literally thanking him since then. You’re going to do the same thing with me. Go check them out regus.com/mixergy.
And if you ever sign up to them and forget to say that I was the one who referred, enjoy it. Don’t feel guilty. I felt guilty with Maneesh and then I went back I told them Maneesh did it. He’s the one who introduced me and they went and they gave him a gift just to show, “Hey, look, Maneesh, you helped this guy, Andrew, out.” I think they gave him a Kindle which he’s a Kindle lover, so I think he loved it. All right. Regus.com/mixergy. I got to cut these ads short. I can’t stop talking about it. Okay. Let’s . . . In my head I’m also, Waseem, going, “I should have told them they could just go for a tour. I should tell them they should check out two office.” Got to stop.
Your first client, you are the one who’s doing the books for him.
Andrew: Just to do what?
Waseem: I mean, a couple things, right? In general, like, what is needed for a business? You need a product that people are willing to buy, you need to understand what they’re willing to pay for it, and you need to understand like, what their expectations are about what is going to get produced. And could we have first like developed all the software and then like tried it out? Yes, but like that would take forever. So it was really interesting because it was a very, very lightweight way of validating like, “Hey, is our messaging resonating? Are we producing the right things for our customers?” Like, does the experience feel good?
Andrew: And you want to understand, what are the problems, where is he sucking data in from, what are we doing once it goes in.
Waseem: And what are the systems that you’re using? Like, how do you need it to appear in the books? What are the reporting . . . Like, what’s the reporting output you need? Like, that kind of stuff.
Andrew: Did you start to make a list of it of the things that you could automate? You did?
Waseem: Definitely. I mean, the thing that is interesting for us is that because in some ways, like, the customer of the software we’re developing is us, like, we all sit in the same room together. We can have a feedback loop be super, super, super tight, where every month we go back and we kind of do a retrospective to say, “Well, look, what pieces of the process today are slow or error-prone or particularly tedious? Like, how much time is this stuff taking and let’s use that to inform what we build next?” So the feedback loop is really, really tight which is rare and is awesome.
Andrew: Is it as simple as I’m imagining you were making two lists? What are my clients looking for as reporting-wise, data-wise, and what can we automate that’s taking me a long time? Is it . . . You’re smiling at that, so I imagine I’m a little too simplistic. Help me understand it.
Waseem: I think like, look, there are really a couple different avenues of investment for us. One is just like, how do we do better bookkeeping work for our clients? And this is all stuff that’s invisible to the customer. So what we do is actually we’re very rigorous about tracking everything, like, how much time did it take to do the books for customer X and what steps specifically were the slow steps. And then also like, okay, did we make any errors this month, and if we did, where were they and where were they caught? Like, were they caught in a run review? Were they caught in the final review? Were they caught like when the client emailed us?
And like, those two inputs inform like, okay, wow, we’re spending X hours on bank reconciliations this month, and like, it still hasn’t gone down. Like, let’s get the bookkeepers. It’s got a proc specialists. Let’s get the engineers together in a room and say, “Well, look, why is this step taking so long? And what could we build that would make it faster or less error prone?”
So kind of piece one, is that sort of internal, like, how do we just make sure we’re doing really, really, really good work? And then piece two is a much more traditional, like, kind of product process where we say, “Well, what is the customer expecting from us or what are they demanding? What are the things they’ve asked for? And for us, like, what do we think the impact of building them is? Like, what is . . . Is it easy to build this a hard to . . .
Andrew: So, if I were to come to you and say, “I love to have weekly data, a monthly, daily data, that kind of thing,” that would just go on a list somewhere and you sit down and say, “What would it take for us to give Andrew weekly data? What would it take to go daily? How much work?” Got it. Okay.
Waseem: And here’s the thing that’s kind of cool about that, though. If you came to us and you said, “Look, I’m a huge customer and I need you to do all this stuff for me, but I need you to give me weekly data.” Well, today have I built the tool that could give you weekly data? No. But there’s a person or perhaps multiple people depending on the size of the client here that’s doing the work. And could we just go and press the button every single week? Yeah. So we can, like, we can fake it in a way until we’re really, truly ready to build it, and that’s, I think, powerful and quite rare for a software company.
Andrew: And I’m trying to think of other businesses that can operate this way where they do the work for a client, they start to automate behind the scenes and they still return. And I’m not coming up with a lot of examples. Can you?
Waseem: I think it’s the thing that is like starting to become en vogue, this idea of like, people plus software. Like, one investor kind of described it as, like, we’re building like the Iron Man suit for bookkeepers. It’s like, okay, we’ve got the bookkeepers and they have all these tools at their disposal.
Waseem: There are a couple other like . . .
Andrew: Just keeping the bookkeepers but building the Iron Man costume, the Iron Man outfit for them.
Waseem: Exactly. And there’s a company that actually we work pretty closely with called the Atrium that’s trying to do this for law firms. And there was one that was basically trying to be like executive assistant as a service, like, you put them on a CC and it’s combination of like people plus AI to schedule your meetings, that kind of thing. I think, in general, there is this kind of growing trend of how do we take a traditional service that is today, like, slow and totally manual and perhaps error-prone and can we make it better by injecting some software into the mix?
Andrew: Imagining maybe like ad buying to some degree where there’s the constant analysis of the audiences, the ads. What else is there? All right. You’ve got me now thinking about what else could be done that way. All right. You told our producer something that I wish other guests would bring up. You said, “The first 30 to 50 customers came from our extended network.” And here’s the part that I highlighted and enlarged in my notes. “I hesitated before hitting the send button.” Everybody says, “Of course, you’re going to ask your friends. They want to support you.” It’s great, but the truth is asking your friends to try something new is hard. Asking and wasting social capital and worrying about them not returning your messages later because they don’t really want to say no to you. It’s hard. Talk about that feeling if you’re in touch with it.
Waseem: Sure. I mean, look, it’s a little bit of an awkward thing because you’re asking them to do this favor and in some cases, they’ll do it because you’re genuinely solving their problem and in some cases, they’ll do it because they kind of feel some social pressure to do it. It’s like, “Well, Waseem asked me to do this thing. Like, I guess I’ll give it a try.” And for me, I think the way that we tried to . . . or at least the way I tried to make myself feel better about it is, look, the ask was not “Buy my service.” The ask was like, “Well, let’s just talk about what it is that you’re doing today,” because either you’re going to be a good customer for us, in which case, awesome when we talk about next steps or you won’t and that’s useful to me to understand like, fine, why? Are you . . .
Andrew: So the ask wasn’t, “I want you as a client of my new business,” or, “Can I pitch you on that?” It was, “I’m creating this new business that’s going to do bookkeeping for businesses like yours. Can I talk to you and learn what you need?”
Andrew: That’s the ask. And you still hesitated.
Waseem: Well, so actually, there was a time at the previous company at the second one we did this group chat tool. Look, 99.5% of people you send this email to are going to be delighted to help you out. They’re going to be like, “Yeah, Waseem, great to hear from you.” Like, “Sure, we’ll do a 30-minute call. We’ll get a coffee or something.” This person like wrote me back and they were like very like mad. They’re like, “No. Stop spamming me about your company, Waseem. I don’t want to talk to you about chat.” And I was like . . . It completely ruined my day. I was just like, “Wow, I did that.”
Andrew: I get it. And then I get my head about that too. Sometimes.
Waseem: Yeah, it happens.
Andrew: Sometimes I get in my head, sometimes I just let it go and I don’t give it a second thought. It’s hard to say. Do you still think about that person?
Waseem: I mean, I like to resent them a little bit still. [inaudible 00:50:48]
Andrew: You know what? The truth is that they . . .
Waseem: You know I don’t. No, I don’t.
Andrew: You don’t. You don’t resent him at all.
Waseem: I don’t think about it at all, to be honest with you. Like, the reality of this stuff is, look, a lot of making this work is just putting yourself out there and usually I think people like get that, “Hey, you’re doing this new thing. You’re like kind of struggling to make it work.” And they like that because the narrative that’s compelling and they want you to win especially when they’re your friend. I would say that has been far and away my experience. The like angry email, while it happens is by far the exception.
Andrew: How do you convert somebody who’s just listening to you and teach and telling you about their business and their problems with bookkeeping into a customer? What’s the point where you say, “You know, I could actually do that,” without making it feel like this whole time all you’ve been waiting for is an opportunity to sell.
Waseem: Right. I think you need to be honest with yourself about it which is if it’s a sales pitch in disguise, like, they’re going to see through that. You genuinely have to be, like, on the fact-finding mission to understand, okay, what do you do today? How well does it work? Do you like it? Would you be willing to switch? And like the way you’re doing that is you’re asking them like, “What isn’t working? And if a provider could solve these things for you, is that compelling enough to get you to switch?” And then you come back to them and we’re like, “Hey, listen, I know we had that conversation, you said ABC, like, we actually do ABC now. Are you interested in giving it a try?” And it can be a super, super soft ask because [inaudible 00:52:14]
Andrew: I think I have to . . .
Waseem: Your network.
Andrew: You might think I’m a jerk, but I think I have to get in touch with the fact that I’m willing to lose a friend to potentially get customers. I have to get in touch with that and say, “Who are you really?” All right. You know what? I thought of a business that’s very similar that used to be manual and that people are combining software and people to solve SDR, Sales Development Reps. You know, the idea that you’d have a team of people in your office that would put out potential offers and when someone is interested, they would then pass them on to a salesperson and say, “Here, you can actually have a conversation with one of our reps.” SDRs are now being converted into software plus service type businesses, right?
Waseem: Totally, totally. That actually reminds me, there’s a customer of ours who’s doing something similar which is like for recruiting, like, the sourcing stage of the recruiting process, you reach out to a ton of candidates. It’s the exact kind of same thing product where it’s a hybrid.
Andrew: Right. I didn’t think of that. What’s the name of that company?
Waseem: His company is called Sourceress.
Andrew: Sourceress. Okay.
Waseem: Sourceress with a U like sourcing.
Andrew: And to some degree Drips does that too. What they do is they will . . . If you fill out a form on one of their client sites saying that you’re interested in the clients business, they will then send you a text message that says, “Hey, are you available for a call right now? I saw that you filled out an application.” If you text back and say, “Not now, at 5:00 o’clock,” they’ll respond. That software and real people who are doing it some of those messages are sent by software, some of them are sent by people. All right. I see those opportunities here. You’re kind of opening me up to look at it.
Let’s talk about clients. Jason Fried today said, “Have you fired a client yet? And if you haven’t, what’s keeping you from doing it?” I feel . . . In fact, not I feel, I know that finding the right clients has been an issue for you. Can you talk about that?
Waseem: Sure. Well, I think the challenge . . . The blessing and the curse of our business is, look, every business needs bookkeeping whether it’s a coffee shop or a doctor’s office or a tech company. And I think from the entrepreneurs’ perspective, if you go and you try to do the bookkeeping, for all of those disparate industries or different companies types all at once, you’re going to get pulled in 1,000 different directions. And what that means is, you’re not going to have the focus to build the right tools to kind of do the automation necessary to really do high-quality work for them.
So there’s a strong . . . You have to be wary of being pulled in a bunch of different directions. I think that’s in particular challenge we have because everyone is a potential client. And so for us, it’s like, fine, let’s be thoughtful. Who is our initial target market? How do we reach them? Are there things that disqualify you from being a good customer today? And if so, how do we, like, basically reject you early in the process?
Andrew: And so you didn’t even have problems where you had to reject people or you wish you had rejected people and then you came up with this? You did.
Waseem: Sorry, that is definitely also true, which is [inaudible 00:55:03]
Andrew: Give me an example of someone without saying specifically who they were. What’s the type of business that you realize we have to say no to this people?
Waseem: So, for us, because of our approach we do best when the data comes from an electronic source or some kind, whether it’s, again, like the bank feed or payroll system or something like Stripe or . . .
Waseem: Like, there are lots of businesses in the world, though, that it handles a ton of cash or have a stack of paper receipts or just like have no record keeping and like you have to just email them a bunch asking like, “Okay. This was an ATM deposit. Who is this? Like, what was this? Where did you spend this money?” Those types of clients are quite bad for us because they take up a ton of time. And our model is one in which, like, look, it’s the people plus software working together. So, if there’s any task that is literally 100% people with no software assistance, it’s actually quite expensive for us because we’re not optimized to do that kind of work.
Andrew: Yeah. You’re looking for people who already have something like Stripe pulling in the data who are already working with data sources like that. So, did you take someone on who had paper receipts who said, “Here’s my box”?
Waseem: They didn’t say, “Here’s my box,” but basically, yes, they just . . . The system . . . Like, there was no system and that’s really the problem, which is even if you don’t have good infrastructure in place today, if you’re willing to move to that world, we can do a good job with you. But if you’re just like, “Well, this is how I do things and I’m not going to change and I just like withdraw a bunch of cash from the ATM and then spend it,” like there’s just not a whole lot we can do for you because we have to ask you about literally every single thing. And if we ask you about every single thing, like, you’re basically doing the books.
Andrew: Did you fire them?
Waseem: We did and like, it gave me great pause because I think fundamentally, like, look, when someone signs up with you as a customer like they’re trusting you, like, it’s a very personal . . . Weirdly it’s a very personal thing to become a customer or to sell someone something, especially when you’re on the phone with them, and you’re like, “Yeah, this is what we’re going to do. We’re going to take great care of you.” And then if you learn something that actually changes the situation and you’re not able to take great care of them, then you feel like, “Well, I kind of told you that we could do it and like . . . ”
Andrew: You almost want to take the loss on it.
Waseem: I mean, honestly, usually we do. Like, it’s kind of you just have to own it. Like, “Look, we shouldn’t have taken them on as customer.”
Andrew: You said, “We will do. We’re going to do it.”
Waseem: “But we said we would do it and so we will just do it.”
Andrew: That sucks.
Waseem: There’s something that’s so egregious that like you would just simply cannot, but it’s a super awkward conversation and my preference, in general, is like, “Look, this is . . . You’re paying tuition here, basically.” It’s like, “Yeah, you’re going to lose some money on this customer end, but you learned a valuable lesson in doing it.”
Andrew: And you could do that because this time you raised money. Why did you raise money?
Waseem: Well, I think the ambition with this company or the reason we raised money for this company is because I think the market opportunity is so large because, again, it’s every company has this problem. And so if you just kind of like multiply that out, the market size is enormous. But look, I think there’s an important caveat here, which is look, in Silicon Valley everyone like really fetishized it like, “Oh, you raised a ton of money. You’re going to build a huge company. It’s an amazing thing.” It’s like that’s not the only path. And I think it’s often not even the most lucrative path for the people that do the business. I think like . . .
Andrew: But you’re ready to do where? Because I could imagine you saying, you know, “We’re just going to start growing slowly.” Where’s the team of people? The bookkeepers? What country?
Waseem: They’re all here in San Francisco. Everyone is a full-time employee.
Andrew: The actual bookkeepers are here in San Francisco?
Waseem: I can like see all of them right now. They all sit in this office place.
Andrew: What the hell? Why?
Waseem: Well, here’s the interesting thing about our model, right? Which is, if we can push a lot of this stuff, the tedious mechanical stuff into the software, I actually don’t want an army of like cheap bookkeepers who don’t really know how to do anything. I actually need a small team of experts because they’re only going to be doing the tricky stuff.
Andrew: So, even today, even the fact that they’re sitting and tagging or categorizing items in QuickBooks, you’re saying, “I’m willing to bite that because they need to feel the pain and I need to see them feel the pain and hate that I’m spending a lot of money on them so that we find software solution for it.”
Waseem: And the tight feedback loop which is like the engineer is sitting right by the product specialist.
Andrew: Wow. Why San Francisco? You don’t even need to be in San Francisco.
Waseem: I mean, no, we don’t need to be in San Francisco.
Andrew: You’d be in Akron, Ohio.
Waseem: It would be a lot cheaper to be in Akron, Ohio.
Waseem: I think for us, the thing that actually moved us out here, so we were in Boston for the first two companies. I love Boston. It was awesome. When Dropbox acquired our second company, the whole team moved out here as part of the deal. And then I think like there is a palpable energy of being here, like, there’s a density of talent, there’s a density of investors. Like, there’s a lot to like about being here. But look, it’s not the only place you can build a company.
Andrew: You know what I love about this place? I’m about to have a poker night in my house. I only met the people who were coming over once. I went to their poker game and I said the best way for me to get to know them is to have them come over to my house. I said, “I got good place for poker.” But the freaking conversation there is so interesting, the behind the scenes stuff that people, it’s not like they’re revealing stuff they’re not supposed to say, but they are supposed to keep it within so freaking interesting.
To walk into someone’s house one time and watch them show me how he logged into his competitors Google Drive and pulled out the data from the competitors and what they’re going to do with it. That’s an icky feeling like you have, but I need to see that this goes on and not have my head go into this la di da, the world is all a nice place. Right? That’s the fascinating part for me. And I guess you guys also have families here now, so it’s harder to leave. Is that right?
Waseem: Yeah. It’s just like people put down roots. And I think, look, what you said I think is accurate, which is that there is . . . Even though like video conferencing is great and like they are . . .
Andrew: Why not Oakland? Oakland is great.
Waseem: Yeah. I mean, that’s true. I think there’s a . . .
Andrew: Why did you pick here instead of Oakland?
Waseem: San Francisco, specifically, I think is like geographically it’s like you can get the Oakland, Berkeley people and you can get the South Bay people and like they can work [inaudible 01:00:54]
Andrew: Oh, all right. Okay. So you might be able to pay someone a salary that would let them live in Oakland without you personally moving the office to Oakland and . . .
Waseem: Well, also if we were in Oakland, then the South Bay people getting . . . This is like a decent middle of Caltrain and public transit and the . . .
Andrew: And frankly, the office space is not that expensive. What do you guys pay for office space?
Waseem: You know, I wish I knew. Fortunately, I don’t know and it would make me unhappy if I did know. Jeff . . .
Andrew: You don’t look at your books on a regular basis like every detail?
Waseem: Jeff does, my co-founder.
Andrew: Tell me if I’m nuts. As a guy who does books, whose company is all about this, I sometimes will look down to like the Wall Street Journal, it charges me $4 a month for I don’t know what. I look at it to that degree. Should I be doing that or am I not big-picturing it enough on a monthly basis? If the Wall Street Journal charges me $4, I don’t look at it every day, every week. On a monthly basis, I go over that.
Waseem: Like, it’s a tradeoff, right? Which is, is this the highest value use of your time? Like, no, probably you’re spending more than $4 of your own time in analyzing these charges. On the other hand, like, I kind of get you because like, honestly, I’m pretty cheap. So, like . . .
Andrew: Your lights turn off in the middle of an interview.
Waseem: Look, again, my uncle came to the U.S. with $4, so that Wall Street Journal subscription, like, that covered him for however many years he’s been here. Is it the highest values of your time? No. Is it fine to say, “Look, I know this is irrational, but it makes me happy to do it”? I think you’re allowed to say that.
Andrew: All right. I do think it gives me a good discipline. And what I don’t do is I don’t get involved with the Wall Street Journal. I’ve thought about it, it’s going to be a year now. For some reason, $4 a month, I don’t even know what it’s for. In addition to the annual fee, it’s $4 a month. But I am really not allowing myself to get caught up in the Wall Street Journal’s system. For some reason, the Wall Street Journal won’t let you cancel or manage your account in any way unless you call them up and calling up the Wall Street Journal is not a fun experience.
Waseem: I believe that.
Andrew: All right. You know what? Here’s . . . I was going to close it out, but I realized I didn’t get to the bottom of how you got so many freaking customers. We are talking about a service that would cost, what? $1000, $2,000 a month? Anywhere from what? What’s the range?
Waseem: The minimum plan for us is if you pre-pay annually is 195 a month, like, [inaudible 01:03:04]
Andrew: $195 a month.
Waseem: Yeah. So it’s like $2,400, $2,500.
Andrew: Oh, that’s not much. For some reason I . . . You know why I thought that you guys might be more expensive? Because of the name “Pilot.” What do you guys pay for “pilot,” the domain, pilot.com?
Waseem: A lot. Actually, we have this domain broker. We could do a whole lot of conversation about domains, but in brief, I think the only way to buy a good domain is to like do the search in reverse is to find like 10 names that are not in use and then have the broker or you like try to reach out to them.
Andrew: But didn’t GitHub owned on that or something or was it . . .
Waseem: Pilot.com was previously owned by Hearst, the magazine conglomerate. And look, it was . . .
Andrew: How did you get it from them?
Waseem: I think our domain broker like had beers with the guy who knew the person who owned it.
Andrew: Okay. What was the price of that domain?
Waseem: It was expensive and it definitely, like, the timing we just kind of got lucky on it because after we got it, actually, another investor contacted us and they said, “Hey, one of my portfolio companies has been trying to get pilot.com for years. Can we like buy it from you guys? The Hearst people told us that they would get in touch with us when they were going to sell it.” And we’re like, “No, man. Like, we spent a lot of time and effort like getting pilot.com.”
Andrew: I was just checking out Waseem. I kind of like waseem.com but, no, it’s mobile designer.
Waseem: Some other guy has that. That has been my bane since like 1998. If he’s a listener . . .
Andrew Waseem Sayegh.
Waseem: . . . he can get in touch with me.
Andrew: Yeah, yeah. And he’s not even using it. It’s just pointing over to his 500px site.
Waseem: It’s like Flickr or something, right? Yeah, yeah.
Andrew: So where did you get customers? How are you getting so many so many customers?
Waseem: Sure. Well, so the first 50 as I said were probably like my friends and their extended network.
Andrew: Literally, you got 50 people, 50 friends to sign up for bookkeeping?
Waseem: Quite impressed. I was pretty aggressive. I mean, not just me, my co-founders too. And like, look, we are in the tech scene here in San Francisco and so like we know other startup founders.
Andrew: I get it. I kind of gotten to know you a little bit via email. You’re a likable person to the point where I wouldn’t have patience to be as likable as you are. And I sent you questions. I know that if someone sent me that question, I’d riff for three sentences and move on. You’re like, “I think I should do that.” This is like a Harvard Business Case Study explaining your answer.
Waseem: I appreciate that.
Andrew: Okay. So, beyond your friends, what did you do next?
Waseem: So then I think they’re kind of two avenues we pursued. One is to say, look, organic growth is the best kind of growth. How do we get those folks to refer us other customers? And we just asked them. I mean, we had like . . . In the early days, we just emailed them. We’re like, “Hey, listen, how’s it been going with Pilot? If it’s been going well, are there any other startups you know that are looking for bookkeeping? Would you mind just like pointing them at us?”
And like, that yielded some folks. And then as the customer base kind of increased, we said, “Look, if you refer someone we will give you a credit, we will give them a credit.” Like, that definitely helped kind of move things along as well. And then the other avenue we sort of pursued, again, this is sort of in the very, very early days when it’s really you’re trying to just like catch as you can, like, get customers wherever you’re going to get them. It’s not that you have a whole robust program to do this. The other thing we said is, “Look, where are our customers going or like, where are they being created or where do they hang out?” And it’s like sort of accelerators was a big one for us. Like, they go through YC or TechStars or 500 Startups or whatever.
Andrew: Are you on YC?
Waseem: We’re not, but we were kind of very of that world. We’ve know [inaudible 01:06:17]
Andrew: Oh, I just assumed you were because . . . How many YC customers would you say you have? Y Combinator . . .
Waseem: A bunch. I think the current count is like probably like 70’ish.
Waseem: Yeah, fair number.
Andrew: Because once you get in their network, they just start referring . . .
Waseem: Well, I mean, you also have to do a good job, right?
Andrew: Right, right.
Waseem: Requirement number one is the service needs to be good, but it’s getting to a point where like it does feel like the flywheel is gaining momentum. Like, now when people talk about bookkeeping, like Pilot will come up organically in a way that . . .
Andrew: I have to say it’s never come up for me and I’m in the space and you know I love bookkeeping.
Waseem: Well, here we are on the show, right? After this, there may be more . . .
Andrew: Finally, it’s not me, it’s Sachit Gupta. What about Index Ventures? I was checking out, they’re your big investor. I’m checking out your SimilarWeb traffic count and they are sending you traffic. Are you getting customers from them, like, through their network at all?
Waseem: A little bit in the sense that like, look, they invest in companies, right? And they invest in companies and those companies need bookkeeping. So we do get some referrals from our investors. It’s been interesting to understand like the life cycle of this . . . Like, I thought, for example, law firms would refer us a ton of people because like you go to your lawyer and the lawyer incorporates the company and then they should probably be like, “And get a bookkeeper, go to Pilot.” And I haven’t figured out how to kind of get them to really do it.
Whereas like the investors sort of more mixed success and then like the bank sometimes will do it. You kind of have to get that alignment of interest just so. Like, the one that has worked well for us is actually tax preparers because, look, the taxpayer needs good books to do their work and most people aren’t producing very good books, so we’re unblocking the sale for them so it’s mutually beneficial and I think that’s the key to kind of making these things work.
Andrew: And so what’s your process for getting tax preparers? There are a bunch of them out there, it’s hard to reach them.
Waseem: Well, so one is just like making clear to them that we exist. Like, we have a page on our website. The truth is I think we’d like to invest a lot more there which is in the same way that there’s kind of like a sales channel we go to customers directly and say, “Hey, we do bookkeeping. Come buy it from us. There should be a whole separate track where we go to tax preparers and accounting firms and say, “Hey, we do bookkeeping. This is how that’s going to let you make more money.” And it’s the exact same thing, but it’s a channel sale rather than a direct sale.
Andrew: I’m looking to see Reddit is sending you a bunch of traffic but it’s not because of your bookkeeping stuff, it’s because of the amount of money raised. And then here’s one that seems like it’s sending you some traffic, “Thoughts on Pilot Bookkeeping Service” from somebody.
Waseem: I don’t know if I know about that one.
Andrew: You guys aren’t even working Reddit. It’s just working for your little . . .
Waseem: We do some paid advertising there, I think, and that it’s been interesting.
Andrew: Wow. Okay. I’m taking a look to see a little bit more about where you’re getting your customers. Why is TechStars referring people to you? Same reason? They just think that you’re necessary?
Waseem: I think it’s the same kind of thing, right, where you sort of have to plant the seed. If you can get the first couple people from a given . . .
Andrew: Who’s the first person to TechStars or Y Combinator? I so assume that you were in Y Combinator because so many people are using you.
Waseem: I don’t know. I mean . . .
Andrew: Who’s the first person? You don’t know. You didn’t ask them to put you in there and . . .
Waseem: Sorry. Who is the first YC person?
Waseem: There was a customer of ours, Scale was in YC.
Andrew: Oh, okay. Okay. Okay. So your very first customer was in YC and then did you ask the founder, “Hey, can you help me out?” You did and you’re working in that network. You take him out for drinks. You invited him over for poker at your house or something?
Waseem: I should. I should do more than that.
Andrew: You should.
Andrew: Or maybe not. Why screw with it? Who knows? Maybe you’re not as fun over poker.
Waseem: Well, maybe I should just leave it alone and let it keep doing its thing.
Andrew: Yeah, yeah. All right. We should do like a poker scotch night for like entrepreneurs or Y Combinator.
Waseem: I mean, I’m not . . .
Andrew: Are you good at poker?
Waseem: No, I’m terrible.
Andrew: I suck at it too.
Waseem: My co-founder is very good, though.
Andrew: You know what? I don’t suck at it. I’m fine with it. Here’s the thing that makes me a sucky person at poker. People freaking love talking about how good they are at poker. The best of the best poker players will sit and tell you their hand . . . Or not the best of the best. A lot of poker players will sit and tell you about the hands that they had, the times that they . . . It’s to me it’s like having sex with someone and telling them that the last time you had sex, just be here. Don’t tell me about all these other hands that you had. That’s what makes me a bad poker player. I want to talk about today, I want to talk about life.
Waseem: I just have no poker face, that’s why I’m bad at poker. I’m super transparent.
Andrew: Oh yeah, that would be awful. That would be awful. I think I’m pretty good with that. All right. So, for anyone who wants to go check you guys out, it is pilot.com. It cost them a lot of money, so you can just go straight to that easy URL. For anyone out there that does use them . . .
Waseem: We have a little promotion actually. If they go to pilot.com/mixergy, we have a special Mixergy promo.
Andrew: All right. Just to be clear, I’m getting jack from that and I will not allow you to give me anything from that.
Waseem: Well, it’s unedited. You can’t take it out now.
Andrew: No, no. You can absolutely you should have even included in the beginning. It shows you aren’t pushy enough. What would your uncle say? What would your uncle say?
Waseem: I know.
Andrew: Yeah, it’s a pilot.com/mixergy. I can see you’re taking off a bunch of money for people who go into that. The reason that I want to be clear that I’m not taking a commission on this is because I want people to know, I’m not in cahoots with my guest. I’m not your best friend. I mean, we might be good friends afterwards but my goal is not here to help the guests. My goal is to help the audience member. And I know people tell me how much money I would make if I did it. I think it was AppSumo people who said that they brought in $40,000 from the appearance on Mixergy, something like that.
And people said, “Andrew, you can take a bite of it.” I go, “No, I can’t because I want to be a dick to Noah if that’s what it takes,” or, “I want to be genuine in the interview not worry about how it’s affecting my cut.” Anyway, so I’m genuinely interested in Waseem not because he gives me a cut. You apparently guys will. It’s pilot.com/mixergy.
I am also, here’s what I am in love with. They’re going to boot me as like the place to buy ads, Regus. But remember regus.com/mixergy. The reason I think, by the way, Waseem, that they’re going to boot me, here’s why. We’re not officially in the ad. Ari, do not edit this. One of the past ad spots after was done, I said I love this space. I wanted to emphasize, this is not co-working. It’s my own personal space. And I said, “I could even have sex with my wife in my office and no one’s going to know.” And I realized, this is a little off-brand for them.
Andrew: But I was trying to emphasize, it’s my own little like my space within the office here. It’s not one of these co-working places where they shove you in with 50 other people and then a keg and surprise you supposed to enjoy the fact that there’s a keg. I don’t enjoy that. I enjoy that there’s somebody here who’s going to send out my mail and help me adjust my mic. And I care about business. All right. So, while they’re here as a guest, go check them out at regus.com/mixergy. I’m telling you, you’ll love them. And I do think HostGator will deal with my shenanigans for a lot longer. So hostgator.com/mixergy. You’ll be glad that you signed up with them and show them some support because they deal with some of the stuff that I’ve done with them. Waseem, thanks so much.
Waseem: Thanks for having me on the show.
Andrew: You bet. Bye, everyone.