The Exchanges

Q Talk to me more about how, let me just, you know, not actually what Doug Biner from Winsprint is paying you, but what is your revenue model? Is it a flat fee? Is it a percentage EMV? Is it something else? How do you monetize?

A Yeah. Great question. So, um, we don't do percentage, uh, of, of anything like that. It's a flat fee. We want it to be predictable. And we really look at it as, you know, from an ROI driven perspective, ultimately what we're doing is providing a solution, right? By forming your company, providing payroll, doing the books and doing the taxes, that's a solution. And the outcome is we drive tax savings. Now on average, we're saving 10,000 dollars. And for that, we pay a subscription fee, which you will predictably know you pay that monthly. Or annually. And if you pay a month, it's like two 99 a month. So it's a pretty good deal. You get, you know, basically three times what you put into it. Plus it's tax deductible. So how great is that?

AI assessment note: “we don't do percentage... It's a flat fee... it's like two 99 a month.”

Q Human, tell me why you do that, right? People are gonna wait. He just sold a company for two hundred million bucks. Why would he? Why wouldn't he bet on himself in his next business? He has all the money in the world. Why not keep as much equity as possible?

A Um, I mean, look, it's expensive, uh, to, to start a new business. So, you know, you always, you always need outside capital for these types of businesses. We want to build, you know, a brand that's enduring and iconic, like a square. And at the pace we want to build it at, it just requires a lot of capital. I think if you want to build a business that's, um, sustained off of retained earnings or, you know, the cashflow, that's a different business, right? Then you can, you know, do something more like self-funded, at least that much. At my level, but I mean, even my partner from expert Garrett, who'd done Uber, I mean, we typically will raise outside capital. It's just a speed issue. Second, I would say is the more folks you get around the table, it's not, you know, you get additional perspectives, but also it's, you know, building resiliency in the capital structure, right? So general catalyst, one of the best investors in the world, top five, you see QED, one of the best FinTech investors. So as we're growing, I not only gained their perspectives, but they both, you know, of course have funds. So as there's periods of economic uncertainty, you have more resiliency in the business, right? It's not just one person.

AI assessment note: “at the pace we want to build it at, it just requires a lot of capital.”

Q What does that mean though? Like when I go on your site and look at the pricing page and it's 300 bucks a month, it says business formation, but so why would someone keep paying 300 bucks a month after the business is formed?

A Oh, great point. Great point. So no, we, we don't just form the entity. So we'll form the entity. We actually will set up your books for you. We have payroll. So payroll comes with it. Bookkeeping comes. So we do your books every single month. We'll do quarterly tax estimates. Um, we'll answer any questions that you have, and we'll do your annual taxes. So it's a full service. Again, we deliver that outcome to deliver those savings. That's all the work you have to do. Cause you need to I mean, as, as you probably know, a lot of the magic comes in how you set your payroll when you're trying to get savings in an S-corp. So yeah, there's quite a bit of, uh, work that goes into it. It's full serve.

AI assessment note: “we don't just form the entity. So we'll form the entity. We actually will set up your books”

Q That's great. Okay. I guess looking back, there's a lot of founders on right now in a recession. They're all considering selling is just based off what you went through at add this, any advice you'd give them on running the process of exiting?

A Yeah, I think honestly, I mean, this is a longer discussion, but my, you know, TLDR advice is you never really want to sell your company. You want your company to get bought. And, uh, I know that's a tough thing to say, but in our case at add this, You know, Oracle had partnered with us across, I think, three different opportunities. And then they'd concluded as a result of those partnerships that it was more cost effective for them to, you know, buy us. And I think that drove a better outcome. When you drive a process to sell your company, typically there's a banker involved and it's almost like a more auction style process. And so when you just look at the math behind that, you don't often get the outcome you want. Now, of course, if you're stuck in that situation, it is what it is. And so I would give a different set of advice, but I guess my advice is don't sell if you, if you can't, uh, if you can wait, that's my advice.

AI assessment note: “my, you know, TLDR advice is you never really want to sell your company.”

Q And sorry, I have to push, I have to push you back on that because I've had Zen business on, I've had a rippling on and, and they've got one 31 41 50% NDR. You're telling me you don't even have the possibility to go above a hundred because you have a new upsell. So how can you say you're top decile?

A We're top decile on the retention for our core product. So if they were to just look at their, um, their core product and not the add ons, there's a retention rate there. I would say that in that zone, we, I know we're top decile just based on the stats there. But, um, they have add-ons. So you brought up Zen Business as an example. They've started to add add-ons. They're a couple of years ahead of us. We'll start doing that as well. So whether it's add-ons or new plans, or you want to upsell plans, like we just don't have that. We're not focused on, we're focused on our core product right now, because once we optimize that, then you can add on more things. So we have that potential, obviously, to go above that a hundred percent. And I think you're absolutely right. We would not be in the top, like we're a public company, for example, you have to be It's usually like a buck. 20 plus is considered top to sell on a public.

AI assessment note: “We're top decile on the retention for our core product.”

Q I was gonna say, so was that 20, 22 round you did have caught 20, twenty five million. Was that debt from QED or was that like a traditional convertible note that you're expecting to convert to equity?

A Just a note. It's a YC safe that will convert. Yeah. Yeah. Yeah. So, so we had a bunch of outside investors that we were very lucky again, same philosophy. Can we bring more value? Can we bring more folks to the table that can help us? So, you know, we had, um, a partner who, who, who was an operator led fund, um, at a novius. We had the founders of nerd wallet. Um, uh, they came in through, you know, better tomorrow venture. So that was a great one. It was just a lot of people we wanted around the table anyway, quickly coming in while things were still, you know, it was shaky, but it wasn't quite, you know, where it was.

AI assessment note: “Just a note. It's a YC safe that will convert.”

Q Okay, got it. Well, when was the second? So, did you raise more in 2020 or did you wait to do a series A in 2021? I'm just trying to get the timing of the rounds.

A Yeah. So I can, I can walk you through it. So seed round was in, uh, close in twenty-twenty. And then in twenty-twenty-one, we had our series A. And then twenty-twenty-two, um, we saw kind of the economic climate going as it was. And, um, we had, uh, you know, a partner that partners that were really excited about. And so we just did a quick, you know, small, like, you know, note basically to, to move forward. Right. Um, I had been through the first one and, uh, I think one of the mistakes that I made is, You know, a lot of founders when they, they're used to only the growth period, right? And that was in my twenties.

AI assessment note: “seed round was in, uh, close in twenty-twenty. And then in twenty-twenty-one, we had our series A.”

Q And so can you share order of magnitude how many new applications, not what you're accepting, but new applications you're getting every month?

A Uh, right now, let's see, gosh, I mean, it's thousands right now. I have to go look, but it's, yeah, it's definitely, it's thousands per month. It's increasing like crazy because, um, to your point that you'd mentioned earlier, uh, as you know, we're, you know, we're going through some economic, uh, turbulence, right? But when you look at 2008, where I was running my first company, what ended up happening is the freelancer population boomed because what do, what do companies that have W two's do in periods of uncertainty? They shift to contract labor and that either increases the income of existing contractors, right? Cause they're already in business or creates opportunity for new contractors. That same phenomenon happened in COVID. We saw it firsthand, right? We saw a boom and now it seems like it's happening again. So, you know, I I've been an investor for years. I have got Uh, all their forecasts and we're sitting here, we're growing like crazy actually. Um, so we're hiring. I think there was just an article in tech crunch. In fact, we were mentioned in it. I didn't even realize when our employees ported to a set, like we're one of the only fintechs that are, that are hiring right now.

AI assessment note: “it's definitely, it's thousands per month.”