A Product Market Fit Show | Startup Podcast for Founders
00:22:50 · Shmulik Fishman
[00:22:50] S0: I think a lot of why I start – I still stay so close to clients is they know more about income verification than I do, and so my clients have been educating me on this space and how Equifax does it, how we're different, what type of data they need, how they want it organized, how they want it calculated. It's great to get all of that education from your clients because you're hearing their challenges. You're, able to get from them what they wish was different, and then you can just go build against it. I find myself really being a product manager masquerading as a CEO. Just from a product manager's mindset, it's great to hear the client's problem so you can build the solution, and the closer you can get to the problem, the better. You don't want to be disintermediated from that conversation. I think that's the reason why we've kept our sales team really lean. Even today, Argyle does not have a VP of sales. We have this GM strategy where there's a general manager for each one of our key verticals but all in the purpose of keeping ourselves as close as possible to the client.
00:23:58 · Pablo Srugo, Shmulik Fishman
[00:23:58] S1: One of the best ways I heard this explained to me was it's really a learning flywheel, right? If you think about, if you have an AE and then a VP sales and then you, you have to hope that message goes through that entire chain before it gets to you and then makes its way to product versus if you're the one that's touching all these things. At the beginning, speed and adaptability is what it's all about. That's really putting yourself there makes that flywheel so much tighter and everything move so much faster. [00:24:29] S0: I think this is a podcast for tech founders. You're a tech company, right? You're not a sales company. The thing that Argyle does better than anybody else is build technology for income verification. That's what most of our team is focused on all day. You can have a lean team that is go-to-market and still be really successful. That's not the key differentiator. The key differentiator is the product, the technology that you're building. [00:24:54] S1: Totally. Walk me through maybe just on the fundraising side because things started happening pretty quick. Bain led your seed. It was two and a half million or so. Then, a year later, $20 million Series A, which is a pretty big Series A, especially just a year after a pretty normal size seed. Walk me through that story. How did you connect with them, and why did they decide to make such a big investment?
00:25:16 · Shmulik Fishman
[00:25:16] S0: Yeah. I guess we're going to make some news public, or we're going to give some inside takes. Ajay at Bain reached out to me on LinkedIn. Ajay, if you're listening to this, I still – I believe it was you that reached out to me personally. Yeah. It was a cold email on LinkedIn where Ajay said that he had heard that we were building something really interesting, and he wanted to come and meet me in person. He came to our two-person WeWork that was kitty-corner to the bathroom, so you had to look at everybody going in and out of the bathroom every day as you sat in your cubicle. He came to the office and he sat down. He really dug into the business, and he liked it. I think there's a lot of similarities between what Argyle does for payroll and what some other people like Plaid or Finicity have done for banking. There were some corollaries and an investment thesis around it that really worked. The learning there for me is just be really open to every conversation. Any investor could be the investor for your first round, and some people get picky about who they want to respond to or what order to get investors in. Just talk to everybody. Don't be scared about sending your deck. I certainly wasn't. I think that's the reason Ajay found out about me because somebody forwarded a deck that I had sent to somebody, to somebody, to somebody, then to him, right? It was because I was super open with sharing and wasn't trying to guard the material, and so I think that's how it worked.
00:26:43 · Pablo Srugo
[00:26:43] S1: It’s one thing to do two and a half million dollars or so. I think that's they believe in you. They believe in the thesis. Got it. What happens in that year that leads them to do $20 million check? That's a big size check. They must have seen some serious traction or something that led them to really lean in.
00:27:00 · Shmulik Fishman
[00:27:00] S0: Two things. I think, between the seed and the A, we were able to form a real business plan around the company we were building. During the seed round, we had one or two clients. We had this Level Goals. We had this primitive product. I wasn't able to articulate yet the industry we were in. When we had reached the A, I had done a lot of market analysis on what is Equifax, and Equifax is going to do something like $2.7 billion this year in income verification services. How big is the income verification services market? Apparently, it's $11 billion a year market. It's a huge market. Because we were able to articulate the market we're in, the business plan we have for that market, and yes, some really good traction and growth and a very sticky product – once you start using Argyle, you just keep using it. Those are the set of metrics we needed to get a real investment check. I think it also – the other part of the Argyle business and it's still true today but it's very true in those days, this is an expensive company to build. Building and maintaining payroll integrations to thousands of registered payroll service providers is not cheap. It's infrastructure, and you have to have the infrastructure working at very high up times. That was part of the investment thesis. Let's invest. Let's build real infrastructure that does income verification. A promise that, if people build it – if we build it, people will come, and that has been – that has panned out for us. It did take me articulating to Bain, to the market that there's a huge business there, that this is not just a fun and games company.
00:28:45 · Pablo Srugo, Shmulik Fishman
[00:28:45] S1: Do you think that would've been possible for you to do as a first-time founder? I think there's one thing with, hey, I've got two million ARR, five million ARR. Here's an ARR multiple, and you raise an A. It's another thing to say I'm actually over here on ARR, but I want a round that's this big because I'm going to build all the staff and then it'll come. There's a different level of risk that the investor's taking. Do you think that's more suited for a proven founder like you then, or do you think it still would've been feasible as a first-time founder? [00:29:14] S0: I think TAM is super important and being able to articulate what is your TAM? How are you tracking against that TAM, or what is your SAM? You need to be able to say those with conviction, and you need to be able to say that your revenue is tied to them and have a good thesis around it. I think that matters more than what your ARR is in the aggregate, or if you're a first-time, or a second-time, or third-time founder, can you articulate the business you have and the industry you're building it for? Can you articulate a plan where you can be 50%, 40% of that market? That's what investors want. They want to know that you're going to be become the winner in a space, and they're going to invest and give you dollars based on that analysis because it's the analysis they're doing when they write the investment memo. You're doing the hard work for them. I think that has a lot more about are you one million or three million, first-time or second-time?