A Product Market Fit Show | Startup Podcast for Founders
00:31:23 · Pablo Srugo, Aaron Schumm
[00:31:23] S1: Your boring 401(k)s. [00:31:26] S0: Right? That was largely the definition of Fintech and I was like, well, we're not crypto, we're not payment. So that's your definition of fintech, we're not it, right? I was like, this is us. There were so many conversations I had where people would look at this business like, this is such a great business. I have no idea how to think about it. They're like, way too complicated for me to wrap my head around it and I got a million other things that I can just throw cash at in the crypto space. So they were all cheese and all the investors were chasing things that I'm like, that's not even a real business. And you're throwing cash. And I'm like, we have a real business. It maybe is less obvious and more complicated than most businesses, but this is a real business, right? Fast forward, right? Sitting here today, I can't tell you how many calls and emails, and conference conversations I've had with people. They're like, God, we miss that one, like. [00:32:10] S1: Of course, of course, yes. [00:32:12] S0: But, you know, you just got to do what you do and say, hey, I'm going to focus on what we do and I can't go chase these other things.
00:32:12 · Aaron Schumm, Pablo Srugo
[00:32:12] S0: But, you know, you just got to do what you do and say, hey, I'm going to focus on what we do and I can't go chase these other things. [00:32:18] S1: Well, let me ask you one specific question about fundraising, whether it's the A, the B, the C. Size of the opportunity, this is where I see a lot of founders struggling. Some founders are way better than others at this, right? Your revenue is what it is. Your team is what it is. Your ability to take something and say, here's why this is clearly a $5 to $10 billion outcome versus here's why this is a hundred million dollar outcome. That's, it's really the story and the way you present it. How did you do it for Vestwell? I mean, on the one hand, you say, well, every business has 401(k)s. We'll sell to everybody, but then it's kind of like not believable. So I'm curious how you crafted that.
00:32:54 · Aaron Schumm
[00:32:54] S0: And I would say I've gotten better at it, right? I definitely wasn't great when I started. I mean, if you asked me back in 2016, how big this business would be. I'd be like, oh, it probably has an enterprise value of a couple hundred million dollars, right? I mean, that's literally how I thought about it when I was starting the business. Now, the TAM is huge, right? There's $50 trillion. At that point, I think there was a little less than $40 trillion that had been amassed and you still had half the market. Over half the market wasn't participating at all, right? So let's say today you got about $50 trillion. You got a little over half participating, right? So we're making a dent in it and if you tack on the other $50 trillion that's not created, you've got a $100 trillion TAM you're going after. The only thing in that kind of stratosphere is health care, right? If you go that route. So that's the how I look at it today. But back in 2016, I didn't look at it. I looked at it in just a 401(k) landscape, which was about $10 to $8 trillion, I think at the time. So it has definitely grown and what we could service, and how we do, and how we present it. But now I kind of look at it like it's endless. Not only the core markets that we service today, where there's so many tangential markets that we can also expand into and we're obviously not doing today. But if we wanted to, at some point we could probably double that $100 trillion.
00:34:11 · Pablo Srugo
[00:34:11] S1: If I were to ask you today, how big you think this could be. What's the simplest answer to that without saying, in theory, it could be anything? Just because, at least what I've found is it's this mix between, it's credible, but it's massive. That's what we hope that Venn diagram is, that sweet spot and it's all relative to, today you're at $2 billion. So your story to ten or twenty is a lot easier than somebody who was at $100 million, right? But you're kind of trying to find that sweet spot where it's, I'm going to share something with you. You're going to believe but that's still massive and then I've kind of hit the nail on the head, sort of thing.
00:34:41 · Aaron Schumm
[00:34:41] S0: Yeah, I would say if we did nothing. Let's just say we sat here and we're now continuing to engage with folks and bring on new partners. This business grows into a couple billion of topline ARR, right? With SaaS level gross margins. So that's kind of the scale, like if you're pulling in now. It's not one of those businesses where you're doing a billion dollars of revenue a day, but you're bringing in several billion dollars a year of revenue and it will just continue to grow, right? It's one of those businesses that if the business stayed stagnant, we brought on no new business. It still grows because you still have people getting paid. You still have contributions coming in. You still have assets accumulating, right? And it just continues to ride up, even though we're. Because we do have some basis point component in most of our pricing. So there's an attribute to it, where the business grows just sitting here. So that's a unique thing where you're not just continuing to have to sell, sell, sell. You're like, just make sure the business doesn't churn. Our churn rate is industry low and we kind of reset the bar for how the industry operates.
00:35:44 · Pablo Srugo
[00:35:44] S1: So we have two tactical areas we want to go deep on. Let's start with the first one, you mentioned already that you didn't sell direct to businesses. You sold through advisors, you sold through financial institutions. A lot of startups leverage channels and partnerships to sell. Sometimes they do it exclusively. More often than not, it's kind of like augmenting a direct motion. But in any case, I'm curious, because it's different. It's different obviously selling direct and the ROI that you pitch. And even, just the connection you have to the end customer versus when you're selling through channels and partnerships. Tell me more about how you did it and in mind of an early stage founder that's thinking of doing this. Maybe already doing this, and lessons learned.