Building A Profitable, Steady Growth Subscription Business: Expensify CEO David Barrett (Part 7)

Sramana Mitra: Why do you need to filter the needs? From what you described, it sounds like the system is pretty self-correcting or self-converting?

David Barrett: It is. Most of our time is spent minimizing the number of times that you will need to reach out to us. For example, it’s possible that we can spend several hours dealing with a QuickBooks connection for some customer that will never pay us because this is just an individual person using QuickBooks. We want to make sure that we avoid getting trapped into spending a tremendous amount of time on people that will never pay us. We do all sorts of things like prioritize incoming messages that gives fast responses to people who are the biggest opportunities. It’s pretty self-optimizing. That’s why engineers are such a critical part of our model. Pretty much everything we do comes down to someone from engineering.

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Building A Profitable, Steady Growth Subscription Business: Expensify CEO David Barrett (Part 6)

Sramana Mitra: At that point, you said you were charging subscriptions. Was anyone paying for subscription?

David Barrett: That’s interesting as well. At that time, we weren’t charging. In fact, we didn’t intend to charge for a long time. We raised our million dollars, did our pivot and were doing expense reports. This business was going to be so easy. It’s a classic enterprise play. We raise a lot of money and spend it on ads. Those ads were going to power a marketing theme that gets leads to the sales team. However, we soon learned that it just didn’t work that way. We did a whole lot of things, but we just couldn’t get customers. This is when the second really important thing happened.

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Building A Profitable, Steady Growth Subscription Business: Expensify CEO David Barrett (Part 5)

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 >>>

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

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?

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Building A Profitable, Steady Growth Subscription Business: Expensify CEO David Barrett (Part 3)

David Barrett: Since they thought they were approving something else, they went along with it. In the first year of getting through that barrier, there were many false starts. It was a very depressing and difficult time. The most important piece of advice I would give anybody while going through this difficult time where you’re trying to come up with ideas is don’t tell anybody. The only person who knew what I was doing was my wife. No one in my circle knew anything about the prepaid debit card space, banks, or any of the stuff that I was working on. How could they be helpful? When you ask people who don’t have the ability to help to give it their best shot, they do a bad job. Most times, despite their best intentions, they just come off demoralizing. I’ve concluded that people can’t be helpful if they don’t have the capability to. >>>

Building A Profitable, Steady Growth Subscription Business: Expensify CEO David Barrett (Part 2)

Sramana Mitra: You joined that company in what capacity?

David Barrett: Titles in startups are pretty meaningless, but I was the technology guy. I guess you could call me Head of Engineering or CTO. Travis wasn’t the programmer. I started off doing everything, and then I hired a team under me to help me out.

Sramana Mitra: In 2009, when Akamai acquired Red Swoosh, did you have to go to work for Akamai for several years? >>>

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

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.

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Thought Leaders in Cloud Computing: Assaf Rappaport, CEO of Adallom (Part 5)

Sramana Mitra: How did you fund the company?

Assaf Rappaport: The company started with an investment from Sequoia Capital.

Sramana Mitra: So you raised concept financing from Sequoia?

Assaf Rappaport: Yes.

Sramana Mitra: That’s very unusual. How did you manage to do that? That’s happening very rarely nowadays in the industry. >>>