The Exchanges

Q far too much. But I do want to finish, before we move into a quick fire, and just ask, in terms of your personal preferences about when to put the pedal to the metal, so to speak, you've established product market fit with Expensify, you're a profitable company. Is now not the time to put the pedal to the VC metal, massively expand the team, and go for global domination?

A Well, I guess I challenge that massively expanding the team and raising money is putting the pedal to the metal. I would say those would probably slow things down. I think WhatsApp got to a billion users Okay, why do you need 73 employees to get less success? I mean, other people have gotten astonishing success with small, amazing teams. And so why do we have this perception that somehow hiring people is success? Hiring is a solution to a problem. The more hiring you do means the bigger problems you have. And so it means you couldn't solve them in a more creative and scalable way. I think that our goal, like, in fact, actually this past year, uh, we put in a cap. We said this year, we're only going to hire 12 people. Not because we can't afford more than 12 people, or not because we couldn't use more than 12 people. But we're saying we're becoming too addicted to hiring as a solution to our problems. And so instead of basically expanding our customer success team just massively, instead we said we're going to develop an AI that can solve our customer success for us. And so that's a much harder solution to that problem, but it's a much more scalable one. Because ultimately, if your revenue growth is tightly coupled to And hiring is a really slow and dangerous process, especially because the only way you can hire fast is the lower the quality of your hires, and then you reduce th…

AI assessment note: “I challenge that massively expanding the team and raising money is putting the pedal to the metal.”

Q I do want to latch on to one word that you said there, and it's kind of the supposed social definition of success being that kind of continuous flipping of companies. How do you then define success professionally and from a company perspective?

A I mean, I think that for me, it's all about solving a real problem at scale and doing so in a sustainable fashion. And I think the only way to achieve a broad scale and a long-term sustainability is profit. I know profits almost a dirty word in Silicon Valley, uh, because profit is presumed to be the antithesis of growth. Profit and growth seem like they're just opposed and growth is the most important thing typically seen. And so I would say, no, I think that actual profit and growth can come hand in hand. Our most successful companies are not just the fastest growing, but they're also the most profitable. And I think that if we aim higher to build like, Hey, I want to change the world and also make a ton of money for me and my investors as well. I think that we can do that. People have shown it's possible. It's just hard. And it's much harder to create a high growth, high profit company when you can just pump and dump a startup to the next whoever.

AI assessment note: “it's all about solving a real problem at scale and doing so in a sustainable fashion”

Q I'm an aspiring entrepreneur. I'm starting my first company. What advice would you give me?

A I would say don't tell anyone, and don't talk to anybody. Just do it, because I think that the challenge is people have this, and I felt the same way for a long time. It's like you just, you feel lonely, and so you just, you want the validation from your peers of that what you're doing is a good thing, but Ultimately, they just don't have that capability to help. It's like, like, you could ask me, it's like, hey, David, how do you make a nuclear reactor? And I'm like, I don't know, I guess you get some plutonium or something. I'm like, sure, like, I'll give you my best answer, but it's a shitty answer. You just shouldn't be asking me that question. And likewise, you probably shouldn't be asking your friends how to start a company unless they're starting companies just like yours, but odds are they're not. I think work hard in secrets because it keeps your failures private, and they're hard enough in private, but they're really hard when they're public. And so just work hard. Don't say anything to anyone until you are such a success that you just can't hide it anymore.

AI assessment note: “I would say don't tell anyone, and don't talk to anybody. Just do it”

Q I do want to latch on to one word that you said there, and it's kind of the supposed social definition of success being that kind of continuous flipping of companies. How do you then define success professionally and from a company perspective?

A I mean, I think that for me, it's all about solving a real problem at scale and doing so in a sustainable fashion. And I think the only way to achieve a broad scale and a long-term sustainability is profit. I know profits almost a dirty word in Silicon Valley, uh, because profit is presumed to be the antithesis of growth. Profit and growth seem like they're just opposed and growth is the most important thing typically seen. And so I would say, no, I think that actual profit and growth can come hand in hand. Our most successful companies are not just the fastest growing, but they're also the most profitable. And I think that if we aim higher to build like, Hey, I want to change the world and also make a ton of money for me and my investors as well. I think that we can do that. People have shown it's possible. It's just hard. And it's much harder to create a high growth, high profit company when you can just pump and dump a startup to the next whoever.

AI assessment note: “solving a real problem at scale and doing so in a sustainable fashion.”

Q In terms of you need to make it work as the entrepreneur, absolutely you do. One element that I'm always intrigued by is the inflection point and the transition between stubbornness and then vision for the product and the future that you're looking to build. How do you balance between stubborn and vision, and what do you think that really looks like?

A Man, I have no idea. It's only knowable in retrospect. I mean, everyone wants a good idea, but the challenge of good ideas is they have to look terrible. Like, if it didn't look terrible, it wouldn't be a good idea. It would just be the thing that everyone does. And so a good idea is something that no one else is doing. There's got to be a reason for that. And so the challenge is, the better the idea, the worse it must look. And so if you were to be an entrepreneur, you're basically just dumpster diving through a bunch of terrible ideas that everyone else thinks are awful, and then picking up one and being like, oh my god, this is my company. And the challenge is, good idea has to stink. That doesn't necessarily mean that all ideas that stink are good, because most Terrible ideas truly are, but the best ideas have to look the worst on the surface, and so it's only knowable in retrospect if your idea is a good idea or a bad idea, because they all look the same at the start.

AI assessment note: “It's only knowable in retrospect... they all look the same at the start.”

Q Is that not indicative of the maybe cycle that we're in now where there's potentially tourists in the industry who won't remain when the cycle goes on a downturn?

A I don't know. I don't think it's a cycle. I mean, it's been like this for decades. I mean, maybe I'd say starting in 2000 with like SaaS when, um, it just became so cheap to start startups and everything was so fluffy and bubbly. You could rip out a social network for kittens in like a weekend, and then hopefully someone dumb enough is there to buy it for millions of dollars and you just can keep on doing it. And so maybe things will cool down a bit. So that sort of acquisition cycle in I would say so many of the investors in San Francisco or in Silicon Valley are people who went through this cycle themselves. That's how they got their money. And so that's the thing that they're looking to fund is pumping and dumping more stars. And so I think that it's not just an individual. It's the whole, there's a cycle that goes into it, and maybe that cycle is slowing down, or maybe it's not. I don't really know.

AI assessment note: “I don't think it's a cycle. I mean, it's been like this for decades.”

Q In terms of you need to make it work as the entrepreneur, absolutely you do. One element that I'm always intrigued by is the inflection point and the transition between stubbornness and then vision for the product and the future that you're looking to build. How do you balance between stubborn and vision, and what do you think that really looks like?

A Man, I have no idea. It's only knowable in retrospect. I mean, everyone wants a good idea, but the challenge of good ideas is they have to look terrible. Like, if it didn't look terrible, it wouldn't be a good idea. It would just be the thing that everyone does. And so a good idea is something that no one else is doing. There's got to be a reason for that. And so the challenge is, the better the idea, the worse it must look. And so if you were to be an entrepreneur, you're basically just dumpster diving through a bunch of terrible ideas that everyone else thinks are awful, and then picking up one and being like, oh my god, this is my company. And the challenge is, good idea has to stink. That doesn't necessarily mean that all ideas that stink are good, because most Terrible ideas truly are, but the best ideas have to look the worst on the surface, and so it's only knowable in retrospect if your idea is a good idea or a bad idea, because they all look the same at the start.

AI assessment note: “It's only knowable in retrospect.”

Q Is that not indicative of the maybe cycle that we're in now where there's potentially tourists in the industry who won't remain when the cycle goes on a downturn?

A I don't know. I don't think it's a cycle. I mean, it's been like this for decades. I mean, maybe I'd say starting in 2000 with like SaaS when, um, it just became so cheap to start startups and everything was so fluffy and bubbly. You could rip out a social network for kittens in like a weekend, and then hopefully someone dumb enough is there to buy it for millions of dollars and you just can keep on doing it. And so maybe things will cool down a bit. So that sort of acquisition cycle in I would say so many of the investors in San Francisco or in Silicon Valley are people who went through this cycle themselves. That's how they got their money. And so that's the thing that they're looking to fund is pumping and dumping more stars. And so I think that it's not just an individual. It's the whole, there's a cycle that goes into it, and maybe that cycle is slowing down, or maybe it's not. I don't really know.

AI assessment note: “I don't think it's a cycle. I mean, it's been like this for decades.”

Q have to ask them with this mindset perspective that it honestly, David is, is contrarian to most people on the show, but wonderful for me to hear. How did that you then look to build Expensify with this notion and core element of profitability being an aspect that you wanted to have inherent within the company from, from the start? How did you look to build the company around that?

A Well, I would say it comes down to finding people who just believe in that vision. Now, that's not to say that there are a million investors out, and they have a hugely diverse range of opinions and viewpoints, which is great. It's an incredibly healthy and redundant ecosystem, which is wonderful. And I think that it requires careful patience to find people who want to build a real business and who are in it for the long haul. I mean, our investors, you mentioned Blake at the start. Blake is amazing. I wasn't raising money at all when Blake approached me, and I honestly just wasn't going to take the call Because I'm like, look, I just, I'm not raising. I'm profitable. I just don't really care. There's only Blake beating down my door and then basically insisting on analyzing our data in a very compelling way and just convincing me. It's like, no, I like this business. I like this path. And Blake's a very unusual investor. And I think all our investors are very unusual. Like our first investor was Bobby Lent, the founder of Ariba, who helped build the enterprise market and knew that it was ripe for disruption. And so I think it's hard to be selectively When you are hemorrhaging cash. And so I'd say from the very, very start, we just made sure we just were never in a situation where we absolutely depended upon the investor. We started off basically with a model that just didn't de…

AI assessment note: “We started off basically with a model that just didn't depend upon cash”

Q So if we start on the founders themselves, I know from being an investor that VCs place a huge emphasis on second-time successful SaaS founders. You've said to me before that you'd like to change the cult of the serial entrepreneur. I'd love to start with, what do you really mean by the cult of the serial entrepreneur, and how would you like to change that?

A Sure. I would say the, so in Silicon Valley, it feels like, so I guess, I'll be honest, I feel frustrated in Silicon Valley, because I think that there's sort of two high-level business models. One is that you build kind of a viable business, you care about things like profitability, sustainable business, and acquisition, things like this. But by far, the more popular one is just selling to a bigger sucker. Just making a startup that everyone knows is super stupid, and not really attempting to make a business underneath it, but just knowing or hoping at least that you can kind of flip it to some other company. And it's become just such a truism that it's like, oh, hey, congratulations that your company got acquired. They're like, oh, yeah, thanks, thanks. It's like, yeah, well, I mean, they're going to screw it up, of course. You're like, well, yeah, obviously. But you got paid, right? Oh, yeah, a ton. Good. And that's become Silicon Valley, more often than not, and I would say vastly more often than not, is building something that gets flipped and destroyed. And then people make money in the process, but very little about the world gets sort of improved. And I think that this sort of engenders kind of this idea of this serial entrepreneur that is like, wow, yeah, I've done 10 startups. 10 startups. Each time I did something, I flipped it, and I moved on to the next thing. And …

AI assessment note: “this idea of this serial entrepreneur that is like, wow, yeah, I've done 10 startups”

Q Tell me, who's to blame for this? Is it the suckers who are buying and destroying the companies? Is it the founders who are building these companies purely to flip them? Or is it the VCs who are funding these companies and allowing this to happen?

A So I'd say that's a change. I hesitate to call it a problem, and I don't know. This is maybe makes me a little flippant or in It's kind of the difference between a Silicon Valley investor and like an East Coast investor. The difference is Silicon Valley investors aren't investors. They're gamblers. They're just throwing money at crazy ideas. And so if you have a crazy, absurd idea, you have to raise in Silicon Valley because anyone else is going to hold you to a metric that you can't possibly satisfy. But there's an advantage to having some place on earth that will fund absolutely ridiculous ideas. Like, yes, nine times out of 10, they're terrible, but sometimes they're awesome. And so I'd say the problem probably is to the institutional investors that in general, on average, it's screwed. And I'd say like as an asset class, venture capital returns less than, you know, S and P 500. And so, yes, there are exceptions to that, but not many and not enough to make up for the fact that as a whole, there are tons of, I don't want to say predatory VCs, but basically people who are funding ideas and switching between firms and never actually producing a positive economic return in aggregate over time. And so great things are produced for the world. But the vast majority of what comes out of it is not great, and most of the people who contribute to it lose money.

AI assessment note: “I'd say the problem probably is to the institutional investors”

Q have to ask them with this mindset perspective that it honestly, David is, is contrarian to most people on the show, but wonderful for me to hear. How did that you then look to build Expensify with this notion and core element of profitability being an aspect that you wanted to have inherent within the company from, from the start? How did you look to build the company around that?

A Well, I would say it comes down to finding people who just believe in that vision. Now, that's not to say that there are a million investors out, and they have a hugely diverse range of opinions and viewpoints, which is great. It's an incredibly healthy and redundant ecosystem, which is wonderful. And I think that it requires careful patience to find people who want to build a real business and who are in it for the long haul. I mean, our investors, you mentioned Blake at the start. Blake is amazing. I wasn't raising money at all when Blake approached me, and I honestly just wasn't going to take the call Because I'm like, look, I just, I'm not raising. I'm profitable. I just don't really care. There's only Blake beating down my door and then basically insisting on analyzing our data in a very compelling way and just convincing me. It's like, no, I like this business. I like this path. And Blake's a very unusual investor. And I think all our investors are very unusual. Like our first investor was Bobby Lent, the founder of Ariba, who helped build the enterprise market and knew that it was ripe for disruption. And so I think it's hard to be selectively When you are hemorrhaging cash. And so I'd say from the very, very start, we just made sure we just were never in a situation where we absolutely depended upon the investor. We started off basically with a model that just didn't de…

AI assessment note: “we started off basically with a model that just didn't depend upon cash”

Q Can I ask, what are the benefits to you of the capital constraints? Well, I'll ask about the criticisms, but what are the benefits to you you've experienced from not having that influx of capital from, from day one?

A Oh, I think that they're enormous. And that I'd say, especially a challenge when you're starting a startup is just getting your team on board for making good decisions. Life is very easy when you're a startup because it's kind of like scuba diving. Scuba diving is super easy and feels very safe. It's like, I float up, I float down. There's really no risks involved, but you forget you have one giant risk, and that is, will my VC give me the next, uh, sort of tank? But so long as you consolidate your risk into one place, it feels like you have no risk. And because your company is accustomed to having resources and to feeling comfortable, it just sort of goes into your ethos, and everyone just kind of relaxes a bit. And relaxing, it's kind of like making a great wine. Great wine doesn't happen when you take great care of your grapes. It means you have to stress your grapes. You need to get them, make them work hard to find the resource. I think that's what makes delicious wine. And I think that's what makes an amazing startup is to have your people hungry and working hard and recognizing that it's like, hey, we don't want to be at the mercy of whoever gives us our next air tank. I want to swim to the surface. And the surface is tough, man. It's like the difference being six inches below the water is very different than the experience being six inches above the water. It's very har…

AI assessment note: “I think that's what makes an amazing startup is to have your people hungry”

Q Can I ask, what are the benefits to you of the capital constraints? Well, I'll ask about the criticisms, but what are the benefits to you you've experienced from not having that influx of capital from, from day one?

A Oh, I think that they're enormous. And that I'd say, especially a challenge when you're starting a startup is just getting your team on board for making good decisions. Life is very easy when you're a startup because it's kind of like scuba diving. Scuba diving is super easy and feels very safe. It's like, I float up, I float down. There's really no risks involved, but you forget you have one giant risk, and that is, will my VC give me the next, uh, sort of tank? But so long as you consolidate your risk into one place, it feels like you have no risk. And because your company is accustomed to having resources and to feeling comfortable, it just sort of goes into your ethos, and everyone just kind of relaxes a bit. And relaxing, it's kind of like making a great wine. Great wine doesn't happen when you take great care of your grapes. It means you have to stress your grapes. You need to get them, make them work hard to find the resource. I think that's what makes delicious wine. And I think that's what makes an amazing startup is to have your people hungry and working hard and recognizing that it's like, hey, we don't want to be at the mercy of whoever gives us our next air tank. I want to swim to the surface. And the surface is tough, man. It's like the difference being six inches below the water is very different than the experience being six inches above the water. It's very har…

AI assessment note: “I think that's what makes an amazing startup is to have your people hungry”

Q And then let's finish today on the next five years for you and for Expansify. What does the roadmap ahead hold?

A I would say more of the same. I think that, uh, we have a very unusual business model where individual users, We'll download Expensify for free with a mobile app. They'll start using us without asking permission, and then they will essentially get their co-workers on board and then promote Expensify from within. That's why we don't do any advertising. We don't do any outbound calling. It's a hundred percent inbound. We don't have any commission sales, and so we are disrupting the enterprise. We have more customers than Concur, and we're the fastest growing in our space, and so I mean, we're doing it in a way that is completely contrary to what all of the experts assured me was possible, and so I think that we've got a pretty good model here that I think that can Continue to scale for a very long time, and I think that, but the world's a big place. We're boiling a large ocean, and so five years is not that long in the future, and I think that we're certainly going to be at it for much longer than that.

AI assessment note: “I would say more of the same.”

Q So if we start on the founders themselves, I know from being an investor that VCs place a huge emphasis on second-time successful SaaS founders. You've said to me before that you'd like to change the cult of the serial entrepreneur. I'd love to start with, what do you really mean by the cult of the serial entrepreneur, and how would you like to change that?

A Sure. I would say the, so in Silicon Valley, it feels like, so I guess, I'll be honest, I feel frustrated in Silicon Valley, because I think that there's sort of two high-level business models. One is that you build kind of a viable business, you care about things like profitability, sustainable business, and acquisition, things like this. But by far, the more popular one is just selling to a bigger sucker. Just making a startup that everyone knows is super stupid, and not really attempting to make a business underneath it, but just knowing or hoping at least that you can kind of flip it to some other company. And it's become just such a truism that it's like, oh, hey, congratulations that your company got acquired. They're like, oh, yeah, thanks, thanks. It's like, yeah, well, I mean, they're going to screw it up, of course. You're like, well, yeah, obviously. But you got paid, right? Oh, yeah, a ton. Good. And that's become Silicon Valley, more often than not, and I would say vastly more often than not, is building something that gets flipped and destroyed. And then people make money in the process, but very little about the world gets sort of improved. And I think that this sort of engenders kind of this idea of this serial entrepreneur that is like, wow, yeah, I've done 10 startups. 10 startups. Each time I did something, I flipped it, and I moved on to the next thing. And …

AI assessment note: “engenders kind of this idea of this serial entrepreneur that is like, wow”

Q What are the biggest takeaways from working with Travis at Red Swoosh?

A Travis is a great guy. I think, boy, biggest takeaways. I don't know. Travis has a complicated story, and I think he's sort of developed kind of this legend around him, which is perhaps surprising to the people who know him, because he's actually a really nice guy with, I would say, one of the most strong moral compasses I know, and a genuine desire to make the world a better place. And that's just not the perception that people have of him, which is, I've always found very surprising. And so maybe I'd say the biggest takeaway is that Business is not nearly as hard as people make it out to be. I think most of the complexity that people experience is sort of invented complexity. It's a bunch of jargon for people to sort of justify their roles, but when you kind of boil it down, it's like, there's just people, people you need to convince to do what you want or through a variety of tools. And all of the, uh, the distinctions between business and marketing and technology and management and product management, all this stuff, it's like, this is just Mean anything in an absolute sense, and so don't get distracted by what other people insist you need to do. Just know what the problems you have, know the tools at your disposal to fix them, and just get to work.

AI assessment note: “maybe I'd say the biggest takeaway is that Business is not nearly as hard”

Q What are the biggest takeaways from working with Travis at Red Swoosh?

A Travis is a great guy. I think, boy, biggest takeaways. I don't know. Travis has a complicated story, and I think he's sort of developed kind of this legend around him, which is perhaps surprising to the people who know him, because he's actually a really nice guy with, I would say, one of the most strong moral compasses I know, and a genuine desire to make the world a better place. And that's just not the perception that people have of him, which is, I've always found very surprising. And so maybe I'd say the biggest takeaway is that Business is not nearly as hard as people make it out to be. I think most of the complexity that people experience is sort of invented complexity. It's a bunch of jargon for people to sort of justify their roles, but when you kind of boil it down, it's like, there's just people, people you need to convince to do what you want or through a variety of tools. And all of the, uh, the distinctions between business and marketing and technology and management and product management, all this stuff, it's like, this is just Mean anything in an absolute sense, and so don't get distracted by what other people insist you need to do. Just know what the problems you have, know the tools at your disposal to fix them, and just get to work.

AI assessment note: “maybe I'd say the biggest takeaway is that Business is not nearly as hard”

Q I do want to pose a challenge to your element on the focus on profit, and being that growth is the biggest determinant of valuations at IPOs, how important then, with that kind of public markets perspective and appreciation of growth, how important is it for startups to be profitable?

A I mean, it's a good question, and it comes down to, like, what you want to do, and I agree. At one point, I also viewed, like, wow, IPO is success, and, like, that's the end. Like, we celebrate this concept of the exit, as if the point of building a company is to leave, and I would say, like, I don't know, man. I kind of want a bigger and bigger company that can do more and more amazing things. I don't want to leave. I want a company that gets better over time, and because when you look at the Still with Facebook, like all the great companies out there still have their best people because they're the best place to be. And so when it comes to an IPO, I agree. That's sort of often seen as like, hey, the goal is just to like, hang on long enough, stomach the problems until you get to an IPO, get through your lockout period, and then sell, and then hopefully your price will last long enough. And like, and that's success. And I'm like, fuck that. I think that's success by a very narrow definition. I think that an IPO for a truly successful company is just a state change. It actually doesn't really mean anything too much to the company overall. It's just a way to get money. And I would say, I think defining success is In terms of what your next investor wants, I think is a very narrow and sort of my epic definition of success.

AI assessment note: “defining success is In terms of what your next investor wants, I think is a very narrow”

Q Tell me, who's to blame for this? Is it the suckers who are buying and destroying the companies? Is it the founders who are building these companies purely to flip them? Or is it the VCs who are funding these companies and allowing this to happen?

A So I'd say that's a change. I hesitate to call it a problem, and I don't know. This is maybe makes me a little flippant or in It's kind of the difference between a Silicon Valley investor and like an East Coast investor. The difference is Silicon Valley investors aren't investors. They're gamblers. They're just throwing money at crazy ideas. And so if you have a crazy, absurd idea, you have to raise in Silicon Valley because anyone else is going to hold you to a metric that you can't possibly satisfy. But there's an advantage to having some place on earth that will fund absolutely ridiculous ideas. Like, yes, nine times out of 10, they're terrible, but sometimes they're awesome. And so I'd say the problem probably is to the institutional investors that in general, on average, it's screwed. And I'd say like as an asset class, venture capital returns less than, you know, S and P 500. And so, yes, there are exceptions to that, but not many and not enough to make up for the fact that as a whole, there are tons of, I don't want to say predatory VCs, but basically people who are funding ideas and switching between firms and never actually producing a positive economic return in aggregate over time. And so great things are produced for the world. But the vast majority of what comes out of it is not great, and most of the people who contribute to it lose money.

AI assessment note: “I hesitate to call it a problem, and I don't know.”

Q I do want to pose a challenge to your element on the focus on profit, and being that growth is the biggest determinant of valuations at IPOs, how important then, with that kind of public markets perspective and appreciation of growth, how important is it for startups to be profitable?

A I mean, it's a good question, and it comes down to, like, what you want to do, and I agree. At one point, I also viewed, like, wow, IPO is success, and, like, that's the end. Like, we celebrate this concept of the exit, as if the point of building a company is to leave, and I would say, like, I don't know, man. I kind of want a bigger and bigger company that can do more and more amazing things. I don't want to leave. I want a company that gets better over time, and because when you look at the Still with Facebook, like all the great companies out there still have their best people because they're the best place to be. And so when it comes to an IPO, I agree. That's sort of often seen as like, hey, the goal is just to like, hang on long enough, stomach the problems until you get to an IPO, get through your lockout period, and then sell, and then hopefully your price will last long enough. And like, and that's success. And I'm like, fuck that. I think that's success by a very narrow definition. I think that an IPO for a truly successful company is just a state change. It actually doesn't really mean anything too much to the company overall. It's just a way to get money. And I would say, I think defining success is In terms of what your next investor wants, I think is a very narrow and sort of my epic definition of success.

AI assessment note: “defining success is In terms of what your next investor wants, I think is a very narrow”