Oct 22, 2024 · 54m · saastr
Approaching Half a Million Customers: How to Win in SMB | BILL CEO and Founder René Lacerte
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this SaaStr Annual fireside chat, SaaStr CEO Jason Lemkin interviews BILL founder and CEO René Lacerte on scaling an SMB financial operations platform to $1.4 billion in revenue, exploring network moats, software-led payments, and founder endurance.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Jason holds 32.6% of the talking time here. How this is scored →
Jason as informed peer 6.2 Guest teaching 4.3 Guest disagreement 1.2 Jason pushing back 2.1
speaking balance: gold is Jason, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 6:24 René pushes back on macro immunity premise
René firmly rejects the notion that BILL's low subscription cost makes it immune to macroeconomic contraction, explaining that aggregate transaction volume directly drops when businesses hold onto cash.
Hardest push from Jason ▶ 6:15 Jason challenges BILL's sensitivity to macro downturnsJason pushes back against macro sensitivity arguments, contending that BILL's pricing is so cost-effective relative to ROI that SMBs should never cut or delay it.
Biggest teaching moment ▶ 30:27 René explains proprietary payment licensing across 50 statesRené educates Jason on why BILL achieves software-grade 80% margins on transactions by spending five years securing 50 state money transmitter licenses rather than relying on third-party aggregators.
Jason holds their own ▶ 38:24 Jason dissects public company retention asterisksJason brings deep SaaS investor domain expertise to explain how most public companies inflate retention figures by excluding early-life churn cohorts, verifying that BILL's 86% metric represents true top-tier performance.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Jason as informed peer | Guest teaching | Guest disagreement | Jason pushing back | Why |
|---|---|---|---|---|---|---|
| Opening Remarks and Founder Journeys | 6 | 2 | 1 | 1 | Jason Lemkin kicks off the session by drawing comparisons between starting EchoSign and René Lacerte starting BILL in 2006. Lemkin shares SaaStr's operational usage of BILL, establishing peer rapport and mutual respect. | |
| Overview of BILL and Core Value Proposition | 4 | 3 | 1 | 1 | René gives a comprehensive overview of BILL's expansion from AP/AR automation into spend management and forecasting across nearly 475,000 customers. Jason prompts René for company statistics. | |
| Navigating the Macro Environment and Pricing Dynamics | 7 | 5 | 2 | 4 | Jason challenges whether BILL should be largely immune to macroeconomic downturns given its low price relative to value. René clarifies that while customer count growth remains consistent, transaction volume per SMB fluctuates directly with macro spend. | |
| Multi-Stakeholder Experiences and Product NPS | 6 | 4 | 1 | 2 | Jason shares his personal executive workflow on BILL and asks how BILL balances divergent NPS across executive approvers, clerks, and outsourced accountants. René details how user personas dictate product experience and mobile NPS. | |
| Driving Customer Empathy and Dogfooding Culture | 6 | 3 | 1 | 2 | Jason explores how companies prevent disconnect between product teams and non-buyer end users, sharing his EchoSign support policy. René details BILL's customer shadowing hours and executive bug reporting. | |
| Founder Longevity and Sustainable High Performance | 5 | 4 | 1 | 1 | Jason asks René how he avoids founder burnout after over three decades building SMB software. René explains 'hard goals', maintaining constructive dissatisfaction, and daily wellness rituals. | |
| Key Inflection Points and the Power of Networks | 6 | 4 | 1 | 2 | Jason asks about the multi-year inflection point required to reach two-sided network density. René recalls early customer validation from his father and the eventual virality of ACH integration. | |
| Constructing a Moat via Network and Compliance | 6 | 5 | 1 | 2 | Jason asks whether the network acts as an impenetrable moat. René explains that moving 1% of US GDP requires deep compliance and regulatory trust that competitors cannot easily replicate. | |
| Business Model Evolution: Software-Led Payments | 7 | 4 | 2 | 3 | Jason notes that BILL's revenue composition shifted from 85% SaaS to over 80% payments, questioning if BILL is still a software company. René emphasizes that software is the gateway that earns the right to monetize payments. | |
| Building an In-House Payment Infrastructure | 7 | 6 | 1 | 2 | Jason investigates why BILL maintains ~80% gross margins on payments whereas peers like Toast or Shopify have much lower margins. René explains the heavy investment in obtaining money transmitter licenses across all 50 states. | |
| Evolving SMB Expectations and Platform Consolidation | 6 | 4 | 1 | 2 | Jason discusses rising SMB product expectations and the push for multi-product consolidation. René explains the transition from being a single product feature to an integrated financial hub. | |
| Unit Economics, CAC Payback, and Logo Retention | 7 | 5 | 1 | 2 | Jason highlights BILL's 6-quarter CAC payback and explores SMB logo retention. René reveals BILL's 86% annual logo retention and clarifies that they do not exclude initial onboarding cohorts from the calculation. | |
| Expanding TAM and Monetizing the Supplier Network | 6 | 5 | 1 | 2 | Jason probes realistic SMB TAM ceilings. René outlines how BILL is expanding its revenue TAM by treating suppliers in the network as monetizable customers for invoice financing and accelerated payments. | |
| Market Penetration, Accounting Channels, and Tipping Points | 8 | 6 | 2 | 3 | Jason asks if BILL will hit penetration headwinds at scale. René counters using Pete Kight's insight that tipping points are only visible in hindsight, emphasizing that BILL has only penetrated 3% of the 6M employer SMB TAM. | |
| Executing Strategic M&A: The Divi Acquisition | 6 | 4 | 1 | 2 | Jason inquires into how BILL evaluated the $2B+ acquisition of Divvy. René shares that BILL's transaction data directly revealed customer adoption and high customer satisfaction with Divvy before acquiring them. |
Statements from this episode (36)
EchoSign generated $1M monthly revenue growing over 100% when sold
“I sold in 2011 accidentally. We were at a million a month growing a hundred percent, a 120% in our, I thought I was failing.”
SaaStr processes $22M annually through BILL with a six-person team
“We're Six people pushing twenty two million a year through bill.”
BILL has 250,000 core platform customers out of 475,000 total
“And that's on the, on all three kind of original platforms, if you will, that's Bill, that's Divi, that's Invoice To Go. On the core builds probably around 250,000.”
Non-AI SMB spend per customer has been flat for three quarters
“What we've seen this year is more stabilization in the last maybe three quarters. And so I call this the wait and see economy. This is, nobody's investing for growth the way they were three years ago, which is crazy. People were just investing, investing. Obvi…”
BILL consistently adds roughly 45,000 customers per quarter
“We've grown customers, right? And so that sense, we are immune. Like we keep adding customers roughly 45,000 a quarter. We've been doing that for a while. That's very consistent growth for us.”
BILL monetizes customer transaction spend in addition to subscription fees
“And our goal was to get people in on subscription. We'll talk more about that later. And then earn the right to do these transactions, which then allow us to make more money. So we make more money on all the spend that you have, not just on the subscription fe…”
BILL's mobile app users have the highest Net Promoter Score
“I think the mobile phone users, they have the highest MPS, right? That's just super simple and super easy.”
Product empathy and dogfooding culture must start with leadership
“It does start at the top. Like I will go into any roadmap discussion and I will be talking about the product. I'm in the UX Slack channel. I'm reporting bugs. And that helps people know that, Hey, this is valued in the culture that we all need to use the appli…”
BILL hosts open customer support shadowing hours for all employees
“So what we do now is we run We have support hours where anybody can join and watch support get done.”
Some $100M ARR B2B companies dropped from 100% growth to zero
“There are hot B to B companies that were growing a hundred percent at a hundred million in 20, 21 that are growing zero percent.”
Constructive dissatisfaction prevents complacency and drives founder performance
“Being constructively dissatisfied is a good thing in life. And sometimes people think you're dissatisfied. No, I'm constructively dissatisfied. I don't let it grow on me, but no, I can always do better.”
BILL generated $50M in revenue and had 1M network users in 2017
“Fast forward to 20 17 when, okay, the business is starting to scale. Probably 2017 was fifty million in revenue or something like that. And we had a network that was a million or more.”
BILL once reported 300% year-over-year revenue growth on an earnings call
“To be on a public earnings call and to be public and to say, we grew 300% year over year. That was a fun day. And I knew I'd pay the price later because you can't grow that fast forever.”
BILL processes 1% of US GDP annually and $1T in five years
“One percent of GDP goes through bill. One percent every year. A trillion dollars has been moved on the platform in the last five years.”
BILL connects 7.1 million network members for immediate vendor onboarding
“The network is a part of that because 7.1 million means that when you sign up today, there's a chance that your vendor is going to be there and that you don't have to worry about figuring out how to pay them.”
BILL's direct competitors are not regulated money transmitters
“The part that I think becomes a moat competitively is we move money and it's regulated and we do it well. I don't know any of our competitors that are actually regulated that know how to, we have regulators in our shop all the time.”
Financial platforms only earn the right to monetize payments through software excellence
“We don't get to do your payments unless you love the software that you just talked about. Like we are a software government. We have to make a great experience. We have to make it so that when you're going between buildings, you can actually pay a bill if you …”
BILL operates over 12 distinct payment revenue streams
“Creating these different touchpoints, we have over 12 different payment revenue streams, and that's just a lot.”
Toast is fundamentally a software company despite its payment revenue mix
“I think they are a software company. I think they, again, they earned the right to do essentially clear all the restaurant's revenues because they have great software.”
BILL has roughly 80% gross margins compared to Shopify's 50%
“It took forever, but as a result, you've got, you have, like, 80% gross margins. Shopify is like 50, toast is 30.”
Obtaining 50-state money transmitter licenses took BILL at least five years
“Getting all the licenses, the MTLs, money transfer licenses across all 50 states... It was Probably a five year effort, at least.”
BILL employs roughly 100 engineers and product managers solely on payments
“There's an engineering team and a product team that just works on the payment engine. All they do all day long... That team probably is around a hundred or so.”
Choice overload drives small businesses to demand software consolidation
“So what that tells consumers and all of us is that there's too much choice. Which is why consumers, small businesses, I think of as consumers are asking for consolidation, which is why we've acquired companies is why we built our platform to continue to be ext…”
Many SaaS products are features rather than viable standalone companies
“There's lots of products out there in those thousand companies. Not all of them are standalone companies. And so making sure you think about how do you make that leap to that?”
Founders must define a viable business model before acquiring customers
“Like you don't wait to build the business model. Don't wait to say, Oh, I get the customers. They will come and I'll figure it out. No, have your model. Maybe you don't charge it first, but have a model that says, okay, at this price point, I'm going to be abl…”
BILL maintains an 86% customer logo retention rate
“So what we've shared is that we're at 86% logo retention.”
Supplier payment choices account for 30% of BILL's core revenue
“30% of our core bill revenue comes from suppliers that are making a choice about a payment.”
BILL is beta testing an invoice financing product for suppliers
“We have a new product called invoice financing. That's in alpha beta that lets the supplier say, you know what? I don't want to wait for Jason to pay me in 45 days. He always pays in 45 days, but I don't want to wait for that. I'm going to actually get paid no…”
The core BILL platform has penetrated 3% of US employer businesses
“On the core bill platform out of employers, it's three percent of, so three percent of six million use the core bill”
Klaviyo holds roughly 60% market share in the Shopify ecosystem
“They have probably 60% market share in the Shopify ecosystem.”
BILL's spend management product Divvy is growing roughly 30% year-over-year
“And the spend and expense platform that used to be Divi now built, it's growing exceptionally well. So, roughly, 30% year over year.”
The entire spend management category has fewer than 100,000 business customers
“If you think about it, there is a lot of excitement around the category, but the category is still less than, I don't know, 75,000, a 100,000 businesses that are using the product.”
American Express, JPMorgan, and Capital One will enter spend management software
“And by the way, Amex and JP Morgan and Capital One, they are going to spend time on this, and we believe that our embedded partnership strategy will help.”
BILL processes five million AI document predictions per day
“There's five million predictions a day using AI today on the, all the documents that are coming through Bill.”
SMBs never ask for AI, they only ask to solve pain points
“Nobody has ever asked me for a cloud-based software or AI, or what they ask for is, can you get rid of this pain point? And the pain point is they don't like entering data. They don't like workflow. They want to move money fast. Like they asked for those pain …”