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Building A Profitable, Steady Growth Subscription Business: Expensify CEO David Barrett (Part 4)

Posted on Wednesday, Aug 27th 2014

Sramana Mitra: Who was your co-founder? How did you know him? Why him?

David Barrett: His name is Witold Stankiewicz. He was my first hire at Red Swoosh. After I got fired, within a couple of weeks, everyone else quit. I was what was really holding that team at Akamai. They brought in some other manager and everyone else left.

Sramana Mitra: That makes a lot of sense. What did you tell him about Expensify? Did you tell him the whole complexity around prepaid cards, expense reporting, and banking relationships?

David Barrett: Of course, because we needed to be 100% on the same page. He would be a lousy co-founder if he wasn’t interested in the details or didn’t have the ability to understand them. It’s absolutely important to have complete transparency.

Sramana Mitra: From a user point of view, whom were you going after at this point? For you to talk about customer acquisition, you said you thought it through and planned it, what was the plan?

David Barrett: This is where the story gets a little weird. The point of our expense reporting was a Trojan horse. We really had no intention of doing expense reports. The plan was to launch an expense reporting system at TechCrunch50 to get a whole bunch of interest. Step one was being able to launch it all. That was what I pitched. I had the ability to actually have a good launch. What happens after that is to be determined.

I don’t think we had a clear sense of the product we were trying to build, but we had a clear sense that the technology was really interesting. We were convinced that if we could just get it out there and get it in the hands of real people, then we can figure out exactly what they wanted to do with it. We launched this prototype at TechCrunch. What was interesting is we built a product that was designed to inspire the imagination. It didn’t actually need to work because we intended to throw it all away. Basically, what we pitched at TechCrunch in 2008 is, “Expensify, the corporate card for the masses.”

The idea is we do a special corporate card that pulls them into our expense reporting system. You can take pictures of receipts with your phone, which was a super radical notion at that time. In 2008, iPhone was still pretty new. Feature phones were actually a big deal. We were paying a lot of attention to MMS. We launched this vision of, “Now with Expensify, you can use the special card. It will import directly into your expense reporting system, and you take pictures of receipts with your phone.” Funny thing about that is, for the receipt technology at least, it didn’t work at all. All the phones back then were so horrible that you couldn’t read any image you took of a receipt. It didn’t matter because we were demonstrating a vision.

Over time, we became known primarily for our receipt scanning. It only became possible because one baby iPhone got an autofocus camera. Suddenly, this vision that we’ve been championing became real in a way that we couldn’t have predicted. We launched this proof of concept. Everyone was amazed by our expense reports. They say, “If I could just import my real credit card into your expense reporting system, it would be amazing.” We on the other hand were trying to push our cards. The very next day, MasterCard shut us down.

We learned something incredibly powerful from that. People loved the expense reporting concept unreasonably, more than we could have possibly imagined. Had we asked anybody if we should go into the expense reporting space, everyone would have told us no. What people didn’t realize is that employees actually despise their expense reports. You cannot believe how much they hate their expense reporting systems. This creates an enormous opportunity that has been overlooked for a very long time. We stumbled into it through this path. We happened to have our cards cancelled. We had really no choice but to really take a hard look at it for the first time. I’d say launching at TechCrunch50 and having MasterCard cancel our cards was the best thing that could have happened to us.

Sramana Mitra: What you’re describing is a journey that happens to a lot of people. They start one way and end up completely differently.

David Barrett: It’s an incredibly common story, actually.

This segment is part 4 in the series : Building A Profitable, Steady Growth Subscription Business: Expensify CEO David Barrett
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