A Product Market Fit Show | Startup Podcast for Founders
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.
00:36:20 · Aaron Schumm
[00:36:20] S0: Yeah, so on the enterprise side and the channel partnerships, for better or worse. It was kind of all I knew, right? I had spent my career doing it, living inside of these large organizations. I started my career at Northern Trust on the ERISA side, kind of almost serendipitously, fell into this world. If you asked me back when I graduated undergrad, if I would be in the space. I would have laughed at you and it's all just taking these, weird twists and turns. And I ended up here, but I knew how to engage with large institutions, right? And think through, okay, what's your tech landscape look like? What is the business P&L owner think, right? And how to cultivate those. Now there are different sides of the house. Although I sold it to advisors in my former life and broker dealers. The wealth side operated very differently than the retirement side and I was very adamant of like, why? I was like, it all should be one. You should think about these as the same thing and Morgan Stanley, to credit James Gorman. When he was running the show over there, he was a visionary and was like, this is the future of how this business works. So you can get a like minded individual who sees the future that you also see, right? Being able to get that buy in from an executive level is a lot easier than if you're just trying to convince someone like, hey, this is where the world's going to go. So that was kind of what we did and then we got a couple of early buys. Now, I would say, well, if you looked at the first deck I built for Vestwell before we had written a line of code. There was an element of direct to consumer, right? Think of a robo advisor type thing and I remember some investors like, pick one or the other. You're not going to do both. At least you're not going to do both well. So I was like, well, I don't really know the direct to consumer side. I didn't have that performance marketing tilt to my experience. So I was like, let me go the enterprise route. Cause I know how this is going to work and at least it's way more painful. The times you get kicked in the gut or you get to the finish line and everything falls apart. I mean, it is heart wrenching oftentimes. So, you got to have some thick skin and be able to deal with that, but it's worked out well for us.
00:38:22 · Pablo Srugo
[00:38:22] S1: Well, I'd love to pick one of the two. Whether it's the enterprise channel partnerships, like with the big financial institutions or the advisors. Which is more of a long tail, and just go deep on how you cracked that. What is the playbook that you used to get into, like we said. Either Morgan Stanley on that side or the long tail of advisors that fed your business for the first few years?
00:38:45 · Aaron Schumm
[00:38:45] S0: Yeah, I would the enterprise side, right? Because I think that's closer to my core of what I gauge on. On the enterprise side, there's a lot of it. I think you have to look at some of these deals you do is, it's a long road that you're marching down and you may not make the right turn or it may not fall into your lap the first time around. But often they come around if you just continue to do it. Interesting example, this was JP Morgan. When we sold, the first time we pitched, I think it was 2018, 2019, somewhere in there. We're maybe forty people deep and all of Vestwell. And we went in there, and we pitched. We got to the finals and it was a big RFP process. And you deal with these large banks, the procurement processes. All these things are their own animals and I remember we got to the finals, everyone around the table on their side was like, we want to believe this but they're like, you guys are a Series A company or something. They're like, I don't know if we can bet on. We're JP Morgan, we're the largest bank in the world. How can we bet on this forty person startup to carry what we think is going to be the future of a lot of our business, right? So we lost that, right? And I remember the guy who ran the winning bid. I knew really well on the other side. So they're another solution. I don't want to name the name but he was selling. He called me and he goes, it was you in the finals. And I'm like, yeah. He goes, how the hell did you get there? I laughed because I've known him for decades, right? And I was like, come on, man. I was like, how long have you known me? I was like, I'm going to show up. I'm going to be there and he goes, man. He goes, if you're there now, he's like, I'm screwed. He's like, there is no way I'm going to be able to keep up with the pace at which you're moving and I was like, no, man. I'm coming for you and I'm going to get this account back. I'm like, I'm going to win JP Morgan. Sure enough, fast forward three years later. That other vendor they selected was falling apart and I got a phone call and said, hey, you guys have clearly executed and everything you told us three years ago. The markets are singing songs about you guys. Let's go through this again, right? So we did it again and we won it. And now they've become one of our largest partners, I think we run like seven or eight programs across that bank now.