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Building A Profitable, Steady Growth Subscription Business: Expensify CEO David Barrett (Part 1)

Posted on Sunday, Aug 24th 2014

VCs in Silicon Valley want financial levers that allow you to grow with a hockey-stick curve. Expensify doesn’t have that. In my opinion, however, they have built an excellent, profitable, steady growth subscription business that has an attractive viral characteristic. The business, at some point, may accelerate naturally, but as David notes, the levers are not financial. Very interesting case study.

Sramana Mitra: Let’s start with your personal background. Where were you born and raised? Tell us a little bit about your childhood.

David Barrett: I’ve been a programmer my whole life. I started when I was six.

Sramana Mitra: Where were you born?

David Barrett: I was born in Michigan. I grew up in a combination of Michigan, outside of Chicago and Milwaukee, circling the great lakes, if you will. I started off with videogames as most kids do. I went to the University of Michigan. I worked in the virtual reality web. After that, I went into the game industry in Texas. Basically, I’ve always been doing 3D graphics.

Around 2000, I had an epiphany. I discovered that in order to become a better programmer, I had to focus on the non-programming aspects for a while. C++ was a great programming language, but English is even better. I decided to set aside computers for a bit, and went into more technical writing. Technical writing is interesting because it’s typically not done by someone with a technology background. It’s writing user manuals.

Right now, we talk a lot about user experience and how important it is. That term didn’t really exist in 2000. I realized that writing engineering specifications is actually doing the book ends around the entire company. You’re defining not just what the product is going to do, but because you have a deep understanding of how to build it, you define the product in a way that can only really be built in one particular way. Then, you write the engineering specifications to reinforce that. I found the technical writing role to be an incredibly powerful role.

Sramana Mitra: You were doing this at a company?

David Barrett: Yes, I came out to Silicon Valley and worked in a couple of startups. I joined a startup out here in Cupertino as a technical writer. I did that for a while, then I went into project and product management for a bit. I got back to programming after a while and did peer-to-peer software.

I started off a push-to-talk, video conferencing, screen sharing, and file sharing application. Right then, Skype just came out of nowhere and obliterated me. The reason that Skype came out of nowhere was because it was invented by the founders of Kazaa, the file sharing network. Then one day, they installed Skype on 200 million desktops. It’s very hard to compete with that. While I was licking my wounds from that experience, I was approached by Travis Kalanick who was running a startup called Red Swoosh. He hired me and I hired the rest of the team. We built a bunch of technology. Then we were acquired by Akamai in April of 2007.

Sramana Mitra: What did that company do?

David Barrett: It was peer-to-peer content distribution network. It’s similar to Bit Torrent, but for legitimate content. You’re not dealing with pirates, so there’re fewer users. It’s also more profitable because you’re not sued into oblivion either. Basically we had very large files that needed to be transferred inexpensively and reliably. It’s a perfect match for Akamai because that’s basically what they do.

Sramana Mitra: What year did that exit happen?

David Barrett: That was in April of 2007.

Sramana Mitra: When did the company start?

David Barrett: Every overnight success is five or seven years in the making. Red Swoosh was an old company about seven years old. Travis, as you might imagine, is a pretty interesting guy. He was coming out of a startup called Scour, which has the great distinction of being sued for a quarter trillion dollars by the government. Scour went out of business.

His plan there was, “I’m going to turn everyone suing Scour into a customer.” He used the same pirate technology, but built it for legitimate customers. Then the economy collapsed, and 9/11 happened. When I joined in 2005, it was five years old. At that time, it was just him. We had a lot of old technology, so we cleaned up that technology, expanded it, rewrote a lot of it, added some new customers, then we were acquired by Akamai.

This segment is part 1 in the series : Building A Profitable, Steady Growth Subscription Business: Expensify CEO David Barrett
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