The Exchanges

Q start landing and expanding and you're looking at the email addresses and seeing, you know, at abccompany.com, there's one, the first month, there's 10 a month after that, there's a hundred after that. How do you transition literally technically from your pricing back? And how do you get those people move from paying with their personal cards to selling to a decision maker and a big kind of annual contract?

A It's a great question. And that there is a, we put a lot of time into the upgrade past. And so basically like when you first sign up for the mobile app, we ask you essentially, do you want to collect receipts from someone else or do you want to submit receipts to someone? And if you click submit, it's like, cool. Who do you want to submit them to? And you type in the email address, your manager, it's like, great. Now we know who you Your manager is. Thank you for that introduction. Let me say like, who else submits to that person? And it's like, Oh, he's typing some friends. It's like, great. Now we know your coworkers. We just created a company for you. And then every time anybody submits a receipt, that's another time to promote that to your decision maker. And then we use basically every extension report as a highly targeted marketing message to the actual buyer. And then we say, it's like, Hey, click here to take over this entire policy. And then you can get all this additional functionality.

AI assessment note: “every extension report as a highly targeted marketing message to the actual buyer”

Q Who the heck from the age of six dreams about dealing with expense reports?

A Yeah, you know, uh, my brother and I would sit around with our receipts and dreaming about a day where we could take over. No, no, no, there's nothing like that. I would say initially, actually, Uh, I had no interest in receipts and expense management whatsoever. Like, I'm not an accountant, I have no interest in accounting, things like this, but, uh, after Red Swoosh, I wanted to start a company that solved a problem I'd personally experienced, that I'd pay to have solved, that, uh, could be sold directly to individuals, because I just hated enterprise sales, and I dealt with money. I figured that, you know, uh, the banks make a lot of money out of that, why can't I? And so, uh, I was doing a prepaid debit card idea, uh, That the banks were just totally not happy with because it's just too risky. And so I need to just think, what is the lowest risk application for these prepaid debit cards I can possibly think of? Like, what is the most boring thing I can think of? I'm like, aha, expense reports. So literally it was expensify the corporate card for the masses, just as a proof of concept for this prepaid technology I wanted to build. And the banks sort of like authorize this stuff. And so that's how I get pulled into this space was really as a Trojan horse to get through this risk department by being the dullest thing I could think about. And then when I got into this space, I …

AI assessment note: “I had no interest in receipts and expense management whatsoever.”

Q It makes perfect sense. Okay. Um, wonderful. And then give us a sense of, of size. So how many, I don't know if you measure maybe companies using you or active seats. What do you care about?

A Well, I would say we've got about 25,000 companies that use expensive. Um, and, uh, that raises everything from like Uber, Yahoo, um, uh, Atlassian, a bunch of public companies, um, like Evernotes, most of Silicon Valley, most of the, the, The unicorns or former unicorns all use Expensify. Um, but then, of course, there's just tens of thousands of smaller businesses you've never heard of. Uh, so we're used, uh, worldwide. We get, um, processed in, like, 160 currencies, and we get, uh, in companies all over the world. Um, and then in addition to our 25,000 businesses that use Expensify, we have millions of just individuals. Expensify is completely free for the individual. Just take a picture of the receipt. We'll sort of store it for you, and you can do You know, health savings accounts or, you know, um, reimburse your employer, uh, uh, your, um, like children for allowances, things like this. And so we have this millions of users that use us in a free basis, but then we have, uh, thousands of businesses that use us on a paid basis.

AI assessment note: “we've got about 25,000 companies that use expensive”

Q that your competitors miss the most important part of your pricing, which is the lead generation aspect, um, to people listening that may conflict with something you said earlier, which is you spend no money on On acquisition. Um, and you don't, it sounds like once you kind of land the janitor, how do you get the janitor though? How's that first kind of person in a company find Expensify?

A It is literally all word of mouth. Um, and I would say our focus, when we talk about lead generation, it's not paid lead generation. It's organic lead generation. It still takes work and it takes building a product and a brand. It's like everything from our branding is expense reports that don't suck. This is not a message that is targeted to an accountant. This is very much a message that's targeted to the janitor. Um, or the salesperson, whoever's on the road and things like this. And so I would say all of our emphasis is on, uh, building a product in a brand that generates incredibly strong word of mouth. Like, um, I think our 16 top Google keywords, uh, all involve expensive in the name. Uh, only like .1% of our traffic is actually people searching for SEO keywords. It's all.

AI assessment note: “It is literally all word of mouth. Um, and I would say our focus”

Q Yep, and it's all, is it no touch, or is there a portion of your 110 folks dedicated to picking out the logos they see signing up and expanding?

A Um, it's certainly not no touch. Uh, there's no enterprise. I'm sorry. There's no commission sales component. So no one's paid a commission at all, but we certainly have a support team that stands by because it's activity based pricing. That means we only get paid when you get active, but the only way that you get active is that you've gone through your whole setup process and getting a company on board. So we have a whole team standing by that will help you get on board. Um, and we've got different types of teams for different parts of the organization, different accounting packages and so forth. But I would say that, um, so it's not no touch, but there's no commission sales, and the lack of commission is what distorts everything.

AI assessment note: “it's certainly not no touch. Uh, there's no enterprise. I'm sorry.”

Q Yep. Uh, tell us how you're acquiring customers and don't tell me a weird story of how you've done this. You seem like a pretty creative guy, you know, IE the credit card story with the homeless people. What's a weird strategy you've used to acquire customers?

A Well, I would say, um, so we tried a whole bunch of stuff, but the weirdest one is the only one that really works, and that is just get the hands into the, uh, get the product in the hands of individual employees, and then have them promote from within. So, like, most people are trying to, like, acquire the decision maker, the CFO, or whoever it is. We try to acquire the gender, the person that no one else is paying attention to, because they're the easiest to acquire. Everyone else is, like, you know, has all those, like, tall walls and defenses against being called or whatever. But someone like an individual salesperson is just not used to being targeted for an enterprise product. And so if you're just saying, especially if it's a free product for them, it's like, look, I'm not trying to sell you anything, man. I just want you to track your receipts because I know you hate what you're doing right now, and I can help you out. And so routing around the decision maker has been our entire business model and is why we succeed.

AI assessment note: “routing around the decision maker has been our entire business model”

Q And let me just kind of shape the platform that you jumped off of into Expensify before we talk more about, again, Expensify. So with, with Red Swoosh, when you moved there, I mean, were you, were one of the early folks there?

A Um, the company had a complex history. It's sort of, um, actually Travis's first company was coming called scour. Scour is an early, uh, file sharing network that got sued for, I think a quarter of a trillion dollars. Um, And, uh, and so as a result, that company went bust and then they took their technology and sort of made red swoosh, but that was right before the whole.com crash. And so Travis sort of lingered with our company for years, actually just sort of scraping together one customer time. Uh, and then by the time I joined, he'd already been in the company like six years or something, but he was the only guy, uh, been sort of just barely kind of keeping it going. And then, so I, he hired me.

AI assessment note: “by the time I joined, he'd already been in the company like six years”

Q Okay, got it. So no paid channels. Do you do anything like sponsoring conferences or keynotes, things like that?

A We do a lot of conferences actually. We have like a pretty rigorous conference game. Uh, in addition, we host our own conference, but I would say it's really not for customer acquisition. It's more for establishing sort of brand leadership. And furthermore, it's also about just, um, because we have this very novel customer acquisition channel that no one else does, um, to us, the conferences, everyone else cares about the conferences for lead generation, and we don't, and so we can show up big, much bigger than anyone else, because the ROI of the lead's just not our goal. We're just viewing it, we're viewing the, the value of the conference very different than everyone else, and so we can outspend everyone in our space, because we're just trying to acquire brand loyalty, Which is a very different thing than acquire high or positive ROI leads.

AI assessment note: “We do a lot of conferences actually. We have like a pretty rigorous conference game.”

Q Okay. That makes good sense. And what, like, tell us the origin story here. When did you launch the company and what turned you onto it?

A Well, origin stories are always complicated, um, and I would say, to summarize mine, I, initially I had no interest in expense reports whatsoever. I was doing something just completely different in the prepaid debit card space, and the banks just had no interest in me. They saw me as just way too risky, and so I'm like, all right, I need some low risk. I need some boring. I'm like, what is the most boring thing I can think of? I'm like, ah, expense reports. So that's how I got into it. It was as a Trojan horse to get permission from the banks to launch an entirely different product. And then, um, after we launched this product, everyone's like, yeah, your, your prepaid debit cards are cool and all, but your expense reports are amazing. And up until that point, I actually hadn't intended to build it. I was just, it was a fake product that I was just making up as they went along. And I think I developed the story around it. It's like, oh, this mobile app where We use your camera to scan receipts and then we reimburse you the next day and we import your credit cards and export your accounting package and all this stuff. And everyone's like, if you just, if you just did that, that would be amazing. I'm like, oh, well, maybe we should just do that. So that's how I got.

AI assessment note: “So that's how I got into it. It was as a Trojan horse”

Q rare that a SaaS company kind of, uh, well, I guess considering the, the, when you were founded in 2008, but it's rare that you have that kind of cohort data to actually be able to predict that. For people that are listening to the show that don't have that same cohort of data, what advice would you give them to try and predict those kinds of things for planning?

A It's so hard, and I think that, uh, data doesn't necessarily make things predictable, however, because I would say, like, a challenge is at a certain scale, um, like, just because we've grown month-on-month steady for a long time doesn't necessarily mean we always will, um, and I would say, in general, I would say predictability is not nearly as important as people make it out to seem, because, like, predictability is always good until suddenly something changes and it's no longer predictable. You're fooling yourself if you think you know the future. I think it's much better to build a business that's sort of protected against change, And so I'd say more important than being able to predict, uh, future profitability is actually getting profitable because it just doesn't matter.

AI assessment note: “predictability is not nearly as important as people make it out to seem”

Q uh, how would you, David, sorry to cut you off, but how would you, how would you validate spending more on this? We're using a hypothetical here, but how would you validate spending more on servers if you weren't sure if it was going to pay off or not? Like you have to believe it will, otherwise you wouldn't make that investment in the business, just like your conference spend.

A Yeah. Believing it will and, uh, and quantifying it are not the same thing. I think the most important decisions are generally not quantified. Um, we're not quantifiable. And so I'd say if you're running your business because you can prove with numbers that your decisions are good, you're going to fail because I mean, someone else out there who's bolder than you, better numbers stinks. And it's just, well, yeah, and it's just focused on building a stronger business. So it's like, yeah, we spend millions of dollars in conferences. Could we spend twice as much? There just aren't twice as many conferences to go to. We go to every conference. We go as big as we possibly can and that's it. And so it's not like, do we like, could we cut corners? We probably could. Could we pay more? We probably could, but like, It's good enough, and that's not the thing that's going to move the needle anyway, and so I don't want my organization to focus on overly optimizing something that doesn't matter that much, when it's like, instead, let's focus on just building the best possible brand via every means possible, supporting that with an incredibly good product flow, and then maximizing our differentiation, which is our customer acquisition. And all these numbers, honestly, at the end of the day, just don't really matter.

AI assessment note: “Believing it will and, uh, and quantifying it are not the same thing.”

Q Wait, so like, what pushed you over the edge, though, when you did raise? You just saw a path to spending the capital to get number one in market share, or what?

A Yeah, I don't know. I mean, I, things get more, um, refined over time, and I'd say, uh, we raised because it was possible, because everyone thought you had to. We took some big swings that missed, and so it's, again, it's hard to know. Um, I would say, like, advertising. Like, advertising's tough. Everyone, like, everyone will tell you. It's like, oh, yeah, everyone knows how this works. You raise a bunch of money, you spend it on ads, um, and then you get this, you know, high-performance sales team, and then that's how you build your business. With the exception that no business you cared about was ever built that way. Like every business, every, all the top names in the industry are built through word of mouth. And, but no one talks about that because it's not possible to be funded with, with, with capital. And so therefore VCs don't care about word of mouth because it's not their business model. And I think that's a big challenge being an entrepreneur is recognizing that your job is very different than your investor's job and your, your world out view is this very, very different as well.

AI assessment note: “we raised because it was possible, because everyone thought you had to.”

Q So that's net negative. You have net negative. What about gross?

A Yeah. And so, uh, gross revenue churn, um, is also complicated because it's super frothy. Uh, people will disappear and come back. And so the challenge for like the whole, the whole concept of churn, I think is, uh, is a complicated one because when you boil down, it's like, so why do people care about churn? Well, it's because they care about lifetime value and they care about lifetime value because they want to figure out the payback period of the advertising, but we don't advertise. Uh, we're a hundred percent organic. Uh, there's no advertisement whatsoever. Uh, Uh, and so things like churn was like these numbers, which seems so absolutely critical to your business. They actually just don't really matter, um, to us at least because they don't actually, uh, influence any of the decisions that we make. Cause it's all inbound that we don't do any up on calling whatsoever. It's a hundred percent organic. There's no advertising. It's all word of mouth.

AI assessment note: “things like churn was like these numbers... They actually just don't really matter”