The Exchanges

Q a minute. How do you get to these two K customers? I was brought in. Obviously I knew Bill from you, but as a customer, I came in through our outsource controller, right? Who brought us in. Is that a big channel for you as a channel, a big way you get these little two K customers? Cause the direct marketing and sales is tough at two K, isn't it?

A Yes and no. There is plenty word of mouth. There's plenty self-service that kind of drives customers in. They might still talk to somebody in the sales team, but it can be pretty quick. So, you know, ultimately the three-pronged approach on the ecosystem has worked for us, right? So it's the go direct, obviously optimize digital marketing the best that you can, leverage the word of mouth that you can, the driveries, and then go to accountants, and then obviously go to the strategic partners. So the accounting firms do represent a big bulk of client base. And it, it is because it is like your advisor, they might have 10, 20 clients that they're like, hey, Everybody's going to use this because it's going to enable me to support you better. And that happens. Those are the firms that actually do the, I would say the best with bill.com and they make a business out of it, but they actually change the model around. And sometimes they will say, Hey Jason, you're going to pay me 5000 dollars a month to do all your bookkeeping, but you have to use bill.

AI assessment note: “So the accounting firms do represent a big bulk of client base.”

Q Okay, so I want to dig into it, but at a high level, you've got your pulse on 475,000 small businesses. Are we in a downturn?

A The way we describe this is I would say a year ago, and we talked about this on earnings, there was contraction, not a lot of contraction, but businesses, I would have said a year ago that businesses actually were in a recession because we saw year over year, economy wasn't, but businesses were holding, they were keeping their cash as long as they could keep their cash, which is what everybody here I'm sure did and was trying to do and probably still doing. But 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. Obviously the AI category is investing for growth, but all the other SMBs we see, they're pretty much, yeah, they're flat year over year. They're spent per customer is flat year over year, which means that they're Waiting because there's money there and people just haven't been investing it yet, but at a meta level.

AI assessment note: “what we've seen this year is more stabilization... I call this the wait and see economy”

Q And maybe that's because of the amount we're running through versus head count, but If when you're cheap, and you can tell me you're not cheap, you can tell, but, but if you are, shouldn't you almost be immune to some of these effects? Because it's so cost effective to deploy a bill, like it almost shouldn't matter or a little macro bubble, shouldn't it?

A The effect I was talking about was more of the spend per customer. 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. So I think what, what we see, we are, we aim to provide a lot of value. So if you say we're cheap, that's, I'm happy that you've got a lot of value out of it, right? We look at pricing on a consistent basis and we are trying to maximize adoption in. And typically what we find is that once people are on it, 90 days, that's when they start seeing the real value. You've been on and out a number of years. And so then that creates even more value. 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 fees. And so we're trying, we're managing our gross margins across all of it. And we feel good about the gross margins we have. Obviously from time to time we raise pricing, but the focus is making sure that we're creating the value that customers need. And that's what creates word of mouth.

AI assessment note: “And so that sense, we are immune. Like we keep adding customers”

Q And did the markets just have to evolve and maybe even APIs and others, or why was four years ago not the right time?

A I think it was, for us, we were still working on a number of things. We had the NDEM platform. Part of that NDEM platform was distribution, right? So having a diverse ecosystem that allows us to go direct, which we do, a good number of customers come from that. Allows us to go to accountants, which is a, a many to many relationship, right? So every accounting firm, 5000 across the country, they bring us a lot of customers for accounting firm. And then go to the strategic partners, financial institutions into it. That's a many to many, right? So there's just, and having the ability to have a platform that has that ecosystem, it took time to get that right. At the same time, having a platform that allowed us to bolt on payment vehicles, if you will, It meant that we had to get a number of really strong capabilities around regulatory compliance that I just, we weren't, we were focused on doing it right. So we can make sure that we continue to grow the business and then start adding things on top. And it was, it was very purposeful. It was very intentful on how do we make sure that the business can scale. And we've been very happy with our ability to scale once we add those capabilities on. But I think it really gets back to the efficient go to market. And the efficient platform that we built from day one, get that right. And then there's lots of things you can do with it.

AI assessment note: “I think it was, for us, we were still working on a number of things.”

Q should, if ever, should everyone that can be a fintech and SaaS be one? Should everyone that can find some sort of neobank, virtual card, should everyone, companies like Divi, which we'll get to before we end, they did it. Should we all be a fintech if we can, or is there a, or are there too many? Is there a cautionary tale? Does that, should everybody be doing payments?

A Yes. I'll probably answer the question a little bit differently. I think it's if you have the stomach to do it and have the main expertise to do it. It's a great way to add on to your business model, but I would say it's not for the faint of heart and the regulatory compliance stuff. If I think about the conversations I have with our bank partners, which by the way, has been a great way for us to learn and get ahead of the compliance and regulatory needs. It is pretty daunting, right? And right now, a lot of fintech companies are probably below radar on that front. And so you need to be prepared and investors need to be prepared for what does it mean? I think it was probably our series E or D. So we ended up getting to I for IPO. But in one of our investments, one of the investors is you know what? I'm not sure you guys have all the right regulatory stuff. I'm going to bring my outside counsel in to really help you. And it helped a lot. That was nine years ago.

AI assessment note: “if you have the stomach to do it and have the main expertise to do”

Q So is it a moat and how do you think about it as a moat?

A I definitely believe it's a moat. It's the thing that got me most excited about the business. Sometimes, and everybody does, sometimes I get asked, do you sleep well? Like I always sleep well, but when I don't sleep well, there's usually a few nights a year when I'm not sleeping well with some problem. Usually it's a problem. It could either be the kids or business, right? There's some problem that needs to get solved. When I don't sleep well, I think about other problems because I do like problem solving and that other problem will go need sleep. So something going on at pace cycle in 2004, I started thinking about this problem. And one morning I woke up cause I was like, why am I doing this the same way that my grandfather did 60 years ago?

AI assessment note: “I definitely believe it's a moat. It's the thing that got me most excited”