Sramana Mitra: What kind of customers did you gain traction with?
David Barrett: We did a couple of things. Most of the important things we did were, frankly, just by accident. I would say that the genius of Expensify is not that we have some great insight into the market, rather we knew we didn’t know anything. It’s fine to not know anything, so long as you know that because then, you’re in listening mode. The challenge is when you think you know something and you don’t. That’s a problem.
When we entered the space, we didn’t have any idea about what we’re doing. I don’t know anything about accounting. The most important thing that we did was have this email feature. When you sign-up for Expensify, roughly 30 minutes after the first email, you get a second email from me. It’s a pure text email with no links in it. When you get these emails from me, it doesn’t really look like a marketing email because it just says, “Thanks for signing up for Expensify. I’d love to hear more about you, what you do, and what you’re hoping to find in Expensify.” It’s totally open-ended.
This was the best thing possible that we could have done, because it turns out that it arrives just after your first experience with Expensify. You’re not going to reach out and share that experience, but if we reach out to you right at that exact moment with a message that’s not really a marketing message, but is asking for advice; it might work because people love giving advice. We get a 12% response rate to this email. It wasn’t just response but pages and pages of, “It looks like you just wrote me, but I doubt it. In the off-chance that you’re going to read this, here’s what I hope I would find.”
All of our ideas, for years, came out of this initial email. It’s what built the entire company. I think the fact that we were so willing to listen to our users and do whatever they needed, was really critical. Being open to new ideas as you go was very critical to the way that we went about it.
Sramana Mitra: After you launched at TechCrunch and after working through this market feedback, what did you learn about the competition in that market?
David Barrett: I learned the competition doesn’t matter. A different way of putting it is the competition is email and Excel. It’s a huge market. Everyone does expense report. Every business has expenses. It’s an incredibly universal problem. It’s a huge problem and the competition has such a tiny fraction of it. I would say our major incumbent is Concur. They’re like the ‘Microsoft in expense reports’. They own a large fraction of Fortune 500 but as they move down market, they’re really not a player. In the SMB, there’s no one right now. We’re focusing on the bottom of the market starting with small companies. We weren’t really competing with anyone. It was competing with email and Excel and finding a way to turn this inspired vision of what’s possible into a reality.
Sramana Mitra: The competition matters. There was competition in the enterprise market. From what you’re describing, there wasn’t competition in the low-end of the market which is where you entered the market.
David Barrett: It didn’t matter to us. Even today, we go head to head with Concur all the time as we bid against them. Most of our deals are not competitive against Concur. I’m not trying to steal Concur’s customers. Concur is not trying to steal ours. We’re trying to get to the rest of the world.
Sramana Mitra: To fill up the story on the side of financing, how did you finance the company? Did you use some of the money you made with the Akamai acquisition?
David Barrett: The first two years was self-funded. We just paid for ourselves. I started working on Expensify for real in April 2008. We launched in September 2008. Then we re-launched in April of 2009. This is the real Expensify, based around credit cards import. We raised a million dollars in May 2009, which is interesting because May 2009 was the absolute bottom of the depression. It was a terrible time for most companies, but it was an amazing time for us, because it was at the absolute bottom.
Things were starting to look up. VCs have to invest. Their job is to move money. There’s this huge backlog of investment that just needed to move. Everyone was so demoralized by the social networks space. For us, it was a fantastic time to raise.
Sramana Mitra: When you went into that round of financing in May 2009, what did you have in terms of milestones that you’ve already achieved?
David Barrett: We got a lot of great press out of TechCrunch. Then we launched credit card import. We had a product that worked and it was good. It worked for a very small company. It didn’t work for big ones. The first two rounds fell onto our laps because someone came to us. Each round came because someone else was trying to preempt us. It’s very helpful to enter a market when you already have a term sheet.
Sramana Mitra: From whom did you close your first round and for how much?
David Barrett: The first round was closed by Bobby Lent. He’s the founder of Ariba. It was a million dollar round.
Sramana Mitra: That was an angel round?
David Barrett: He is a super-rich guy. It was a super angel, perhaps.